The trends in the PC industry - strong price pressure in PC hardware and reduced unit sales volumes in the US market - spilled over to the markets for Computer Graphics and Data Communications. Despite the current market situation, ELSA was able to achieve a modest increase in revenues.
The internationally weak markets for PC products and the erosion of memory chip prices had an impact on the company's earnings. Additionally, continued high investments in research and development as well as foreseen losses through the startup of Asian subsidiaries impacted on results. According to DVFA/SG, the group results amounted to a loss of DM 2.5 million. According to US-GAAP, the six month 1998 result on ordinary operations amounted to a loss of DM 2.3 million. One-time charges incurred in the first half of 1998 in connection with the company’s IPO amounted to DM 5.2 million.
Theo Beisch, CEO of ELSA AG, is optimistic about the future. He expects the market to be boosted especially after the CeBIT HOME exhibition. This forecast is supported by the positive feedback of the trade press and customers about ELSA’s newly introduced products.
Beisch expects further revenue growth through the expansion of existing OEM partnerships as well as through new contracts with leading PC-OEMs in Asia. Today, ELSA cooperates with almost all internationally important PC manufacturers. This is a direct result of a long-term orientation towards quality and highest technological standards. The OEM partnerships also provide the basis for establishing new sales channels.
The announced agreement to acquire the US-based Hercules Inc., a pioneer and inventor of the first PC graphics card, will accelerate the expansion into new international sales channels, without ELSA having to pursue the capital intense and time consuming process associated with establishing its own brand. The planned acquisition will also provide overhead cost reductions and synergies.
On the basis of an excellent market position, innovative products and industry partnerships, Beisch is optimistic despite the currently difficult market situation: "The fundamentally positive growth potential of the PC industry and the Internet warrant expectations for further increases in revenue compared to last year. Even if ELSA is unable to escape the current market conditions, its long-term expectations remain unchanged. As evidenced by the Hercules acquisition, ELSA expects to play an active and leading role within the ongoing market consolidation phase."
ELSA AG is a stock company based in Aachen, Germany, with subsidiaries in Santa Clara (California, USA), Taipei (Taiwan), and Tokyo (Japan). Founded in 1980, ELSA has built up a world-class reputation for applying advanced engineering expertise to computer graphics and data communications products. Technological competence, German standards of quality, leading-edge products and services backed up by excellent support: These are factors which firmly place ELSA at the forefront of the market today.
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