Notes to the financial statements - Plasmon

12" Technology
The 12" business continues to be a major
part of Plasmon’s total revenue mix but
overall sales declined some 17% to
£19.6m. The majority of the reduction
was in sales of new drives that declined
58% to £1.4m as 12" solutions become
prohibitively expensive and customers
wait for UDO technology. Sales of 12"
media and service declined a more
modest 12% in total to £7.5m and
£10.1m, respectively.
The change in our 12" business was in line
with our expectations and the rate of
decline should slow as new drive sales
cease and the business becomes a media
and service annuity. The 12" customer
base is firmly wedded to write-once optical
storage solutions and is showing strong
interest in the significant cost advantages
of UDO technology. We are now working
on upgrade and conversion programmes
to migrate these customers to UDO but
still expect to enjoy significant revenues
from 12" media and service for several
more years.
CD/DVD
In response to demand from our major
medical imaging customers such as
Siemens Medical and GE Medical, we
introduced the Enterprise D-Series library
last year with a capacity of up to 2,175
discs. The library is derived from our G-
Series 5.25" platform and its development
was completed ahead of schedule in late
2002 by the outgoing Minneapolis
engineering team.
Plasmon Plc
Annual Report 2003
The response to the Enterprise D has been
excellent and helped CD/DVD sales grow
139% to £6.5m last year. In mid-year we
secured Siemens Medical as a major new
customer for this product and the medical
imaging market in general is adopting DVD
technology because of its low cost. The low
performance of DVD solutions also
matches the infrequent access
requirements of the medical imaging
market, but the reduced reliability and ease
of use of DVD remains a major concern.
However, we expect UDO to regain market
share in this area as it offers higher
performance and reliability at the same
price point as DVD based solutions.
Consultancy
Our optical media consultancy business
had another excellent year in 2002/3 with
revenue growth of 9% to £3.9m compared
to £3.6m the previous year. During the year
we signed significant new agreements
with Intel Research to develop highdensity
phase change storage technology
and with Unaxis AG, to develop 0.1mm
cover layer technology for volume Blu-ray
disc production.
Our CD-R and DVD-R consultancy
business with Ciba Specialty Chemicals
also performed well in 2002/3 and we
estimate the Plasmon-Ciba Ultragreen CD-
R dye has a 65% share of the world-wide
market for CD-R dyes. After a considerable
delay due to technical issues, Ciba will
finally launch a new DVD-R dye in mid 2003
and we expect this to drive significant future
royalty growth as recording video to DVD’s
becomes a mainstream application.
LTO Tape
Our LTO tape library business was a major
disappointment in 2002/3 with revenues flat
at £1.4m. Although we successfully
completed our product range with the
Exabyte autoloader acquisition and
secured the necessary software support,
the market has since commodotised with
the entry of major PC brands such as Dell
with very aggressive pricing. In light of these
changes, we are reviewing our overall tape
strategy to position our products as part of
higher value added solutions and
consequently expect to achieve only
modest growth for this part of our business.
Chief Executive’s Review
12
Software and Connectivity
Sales of our connectivity solutions, which
are included in the relevant major product
category, returned to growth last year with
revenues increasing 60% to £0.8m. During
the year we secured Siemens Medical as a
major new customer for our integrated
NAS connectivity solution to integrate with
the Enterprise DVD libraries they also
purchase from Plasmon. We expect this
trend for major customers to purchase
integrated connectivity and library
solutions from one vendor to increase in
the future and are already discussing
another major opportunity in the medical
imaging market.
We believe the move to networked storage
solutions will continue to be a major trend
within the storage market. Late in 2002 we
commenced development of a new range
of NAS-RAID products that will integrate
internally in our new G-Series libraries and
will provide industry standard connectivity
and performance to optical archive
solutions. The new solutions will be based
on Serial-ATA RAID and Linux software
and will significantly reduce the cost and
complexity of deploying UDO technology.
Other
The majority of this business sector
relates to our optical mastering business
in Caen which had an excellent year in
2002/3 and grew revenues by 31% to
£2.9m. The majority of production is now
CD-R and DVD video masters which we
supply to most of the major disc
manufacturers in the Far East. We are
now entering volume production of DVD-
R masters and expect this to drive further
growth in the coming year.
Longer term we plan to manufacture
masters for Blu-ray video discs and during
the past year we commenced
development of these products. Our
experience with UDO is proving highly
beneficial in this area and should enable
Plasmon to become a leading supplier of
masters and stampers for consumer disc
formats based on blue laser technology.