InFocus Readies Low-Cost Product for Q3

The projector will be among the first built for InFocus by Foxconn, which last fall replaced Flextronics as a supplier, company officials have said. In marketing the new front projector, InFocus will try to ride the “coattails” of next-generation videogames consoles from Microsoft, Nintendo and Sony, Ranson said. The projected is meant for display on a retail endcap, alongside backpacks, replacement lamps and other accessories, company officials have said. InFocus isn’t “banking on significant volume” from the projector this year, but believes there could be “significant growth opportunities” in 2007, Ranson said.

The low-priced projector will be key for InFocus, which has seen earnings sag amid heightened competition. The firm’s new line of home theater projectors, replacing the ScreenPlay 4805 and 5000 models, already is under assault, as Walmart.com promotes the DLP-based IN72 at $1,109, down from a $1,299 suggested retail price. The IN72 features 854x480 resolution, 900 lumens and 2,000:1 contrast ratio. Walmart.com also has been promoting Viewsonic’s PJ400 projector with 800x600 resolution and 1,600 lumens at $698. New InFocus projectors also include the IN76 ($2,999), with 1,280x720p resolution, 1,000 lumens and 3,000:1 contrast ratio.

InFocus is readying a new line of business projectors for delivery this month, including the IN24 and IN26. The new models replace “X” series projectors that were the first InFocus products at under $1,000. The IN24 ($699) uses a 0.6” DLP chip with 800x600 resolution, 1,700 lumens and 2,000:1, while the IN26 ($999) contains most of the same features, but moves to 1,024x768 resolution. Unclear at deadline Wed. was whether InFocus is proceeding with plans to introduce a front projector for educators using a Reflectivity microdisplay technology. Last fall, Ranson said InFocus planned to use Reflectivity’s 0.7” microdisplay with 1,024x768 resolution in a projector possibly priced at $800- $900. Reflectivity was developing microdisplays based on micro-electromechanical systems (MEMS) technology. Earlier this week, InFocus took a $7.5 million charge to write down investments in Reflectivity (8% stake) and VST International. Reflectivity and VST are seeking to raise more capital, but at “reduced valuations”, InFocus said. Since InFocus isn’t in the new funding rounds, it likely will suffer a “significant dilution” of ownership interest in the companies, it said. VST International, which began working with InFocus in 2004, has a narrowcast service featuring a 17” monitor set atop gas pump to cycle through on-site promotions presented in a 2.5 min. loop of information and advertising triggered by lifting the fuel nozzle from the cradle. VST last year said it planned to have the VST Media Network deployed at 1,400-1,700 sites within 12-18 months.

In cutting outlays, InFocus sold off the last $800,000 of its stake in lamp maker Phoenix Electric in Q1. The company seeks buyers for its wireless and The University Network (TUN) digital signage businesses, CFO Roger Rowe said. InFocus bought TUN, which runs digital signage installations at 80 universities, last year. InFocus’ retreat from TUN and its investment in VST is a stark contrast to May 2005, when the company formed a business unit to focus on delivering content that could be sold alongside displays (CED March 16/05 p4). InFocus’ wireless business carried a $400,000 cost in Q1, Rowe said. InFocus’ investment in South Mountain Technologies, a projector-making joint venture with TCL, has a carrying value of $3.5 million. InFocus originally put $10 million into South Mountain, but that’s been reduced by its share -- $1.6 million Q1 -- of the joint venture’s losses.

InFocus reported its Q1 net loss grew to $16.3 million from $13.9 million, counting a $1.1 million restructuring charge. InFocus had $1.1 million in profit from its Motif licensing joint venture with Motorola. Revenue fell to $112 million from $137 million, due partly to the close out of the ScreenPlay 4805 and 5000 front projectors. InFocus sold 94,000 projectors, down from 96,000 the previous quarter. Sales in the Americas declined 16% as the average selling price declined 7%, he said. Gross margin improved to 14.9% from 12% in the 4th quarter, with a goal of hitting the high- end of a 16-18% range in the current quarter, Ranson said. The improved margins will be driven by sales of the new projectors. InFocus expects to post an operating profit in the 2nd quarter in its core business, excluding the wireless and TUN businesses, Ranson said.

During the first quarter, sales of home theater projectors accounted for 21% of revenues, up from 14% in the 4th quarter. Those sold for meeting rooms accounted for 67% of revenue, company officials said. About 60% of revenue came from distributors, while another 11% was derived from retail, flat with the previous quarter, Rowe said. About 85% of projectors sold contained DLP technology, up from 83% the previous quarter, while LCD was 15%, down from 17%, he said. Projectors with 1,024x768 represented 51% of revenue, while those with 800x600 were 49%, Rowe said.

InFocus incurred about $300,000 in costs during the quarter tied to several investigations including an audit committee probe of product shipments to restricted countries. The committee’s investigation found the “severity of this situation was significantly less than initially thought,” said InFocus, which began the investigation in March. However, InFocus did report a “handful” of possible violations to the federal Office of Foreign Assets Control and the Bureau of Industry & Security, the company said. InFocus’ liability for the shipments involved is expected to be less than the $1.6 million it accrued for a charge against 2nd-quarter earnings, Rowe said. A separate internal investigation into the company’s financial controls and business practices in China is expected to be complete by June, he said. The investigations are expected to add $500,000 to 2nd-quarter costs, Rowe said. InFocus also expects to complete the sale of property adjacent to its Wilsonville, Ore., hq in the 2nd quarter, generating net proceeds of about $5 million, Ranson said