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Laserdisk, Laserdisk, Burning Bright?


Inside Wall Street

LASERDISK, LASERDISK, BURNING BRIGHT?

Laserdisks haven't taken the country by storm, and they aren't likely to catch up anytime soon with the ubiquitous videocassettes, the craze of the home-video market. Still, demand for shares of major laserdisk distributor Image Entertainment has pushed the stock up to 8, about twice its price in August. Image is one of the companies in which Metromedia founder and billionaire John Kluge owns a big stake.

True, Image has been in the red for the past five years. But the company--which distributes some 3,500 movies and music videos on laserdisks through an agreement with such movie makers as Disney, Orion, and Sony--plus an exclusive pact with Fox Video--is finally turning around, says analyst Paul Marsh of Kemper Securities Group.

For the first time, Image is expected to post a profit--in fiscal 1992--of 11~ a share on projected sales of $58 million. In the year that ended Mar. 30, 1991, Image sold $48 million worth of laserdisks to owners of 439,000 laser players--just 0.5% of the 90 million homes that own television sets. In 1993, Image should earn 48~ a share on estimated sales of $65 million, figures Marsh. Image's recent private placement of $20 million of secured notes with a major insurance company, says Marsh, will enable Image to pay off a $14 million debt and expand operations.

DEEP POCKETS. Laserdisks resemble a large compact disk but are encoded with both audio and visual information. Sales of laserdisk players have accelerated from 75,000 units in 1987 to 160,000 last year, according to the Electronic Industries Assn., which sees sales this year of 250,000 units. The players now cost $300 to $700, down from $1,000 to $1,500 five years ago. The appeal is growing, notes Marsh, because the "images and sound conveyed by laserdisks are far superior" to those on a VCR. If laserdisks penetrate just 5% of U. S. households, it would mean growth of 1,000% from current market levels.

Marsh sees an average laserdisk household buying 11 disks a year at $35 apiece. That suggests a market of $170 million in 1991. He believes sales will climb to $250 million in 1992 and to $737 million by the end of 1995. Image has 34% of the laserdisk market.

Some big investors speculate that Kluge--who together with partner Stuart Subotnick owns 38.5% of the company--may eventually sell part of the stake to a group that is in the film business. Whispers are that Disney, Paramount Communications, and Pioneer Electronics of Japan are interested in Image. Chairman and CEO Martin Greenwald declined to comment, but says he doesn't rule out a "strategic alliance" with a larger company with deep pockets to enable Image to become a global laserdisk leader.BY GENE G. MARCIAL


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