Pixelworks: So Far, a Good Picture

Broadband is the future. Look at a recent study from IDC. Broadband access
is expected to show annual compounded growth rates of 78% from 1999 to 2003.
As a result, we will see growth for new broadband hardware devices. For
example, the market for flat panel monitors is expected to grow from 4.5
million units in 1999 to 23.2 million by 2004. Also, Internet appliances
are expected to grow from 7.3 million units in 1999 to 32.5 million units in

But what has plagued the broadband future has been the so-called ‘last
mile’. However, there is another problem: the ‘last meter’. That is, once
the data reaches its destination point, it needs to be reformulated.

Pixelworks has been developing products to solve the last-meter problem.
This week, the company is expected to have its IPO.

Pixelworks plans to sell 5.8 million shares between the price range of
$12-$14. The lead underwriter is Salomon Smith Barney and the proposed
ticker symbol is PXLW.

Basically, Pixelworks is a semiconductor company that focuses on handling
huge amounts of data which are transformed into rich video and audio. In
fact, the technology is built for a variety of formats: HDTV, multimedia
projects and flat-panel monitors.

As is the case with all well-designed chips, Pixelworks has been able to
integrate the many functions – memory, image processing, etc. – on a single
piece of silicon. In a sense, it is a system-on-a-chip. This makes things
more compact, as well as cheaper. Although, to add more sophistication,
Pixelworks has also developed add-on software modules.

Revenues have been growing nicely. For the first quarter of 2000, revenues
were $7.1 million, which compares to $451,000 in the same period a year ago.
Although, the company is still showing losses.

Such top name customers include Compaq, Sony and ViewSonic. The company also
has strong venture capital backing: Battery Ventures and Sequoia Capital.

True, the competitive landscape for Pixelworks is fierce. Yet, the market
should continue to grow rapidly and so far, Pixelworks has done a great job
of leveraging its technology. Even though the IPO market is currently
dicey, investors will probably like this IPO.

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