Sales for the first nine months of the current business year totaled DM 200.7 million, compared to DM 207.3 million for the same period of the previous year. However, ELSA did manage to increase its market share in the computer graphics market segment by increasing the number of units sold, according to President and CEO Theo Beisch. In addition, he said, the Company's share of the data communications market had been stabilized at high levels and despite strong competition.
The earnings trend for the third quarter followed the second, leading to a cumulative consolidated loss. US-GAAP earnings resulted to minus DM 4.2 million for the entire year. The planned start-up losses for ELSA's newly founded subsidiaries in Japan and Taiwan and the changing competitive situation of ELSA's U.S. subsidiary both negatively impacted earnings.
ELSA expects a fundamental reversal in this trend to occur during the current fourth quarter. Overall PC market sales figures have been clearly increasing again since September of this year, while ELSA's new products in particular are stimulating sales and enabling margins to return to normal. The new products in the Company's Computer Graphics and Data Communications segments are regularly being awarded top marks in tests and reader surveys by the leading computer magazines in Germany and the U.S.
"We can already indicate significant sales growth in the current quarter, expecting 4th quarter revenues to exceed the same period of the previous year by about 10%. This would indicate that the total year's sales will slightly exceed our 1997 revenues", said Beisch. "In addition, ELSA has optimized its cost structure: a steady reduction in inventory levels is a key goal for the coming months. For the future, we are implementing new sourcing and logistics models as part of strategic supplier relationships, adopting 'supplier managed inventory' supply chain management models. This will prevent inventory risks recurring. ELSA will thus be on a level with the major players in the industry in this area, and will increasingly be passing on this risk to suppliers. The pressure on gross margins is returning to normal; this is due in particular to our new products being extremely well received in the market. In view of our new innovative products, such as the high-speed cable modem for Internet access we announced during the current quarter, and the prospect of future cooperative ventures and acquisitions, we are optimistic about the future."
Aachen, November 27, 1998
The Board
Founded in 1980, ELSA currently has 566 employees. In addition to its head-quarters in Aachen, Germany, the Company has subsidiaries in Santa Clara (California), Taipei (Taiwan) and Tokyo (Japan). ELSA develops, produces and markets PC hardware and software components for the Data Communications and Computer Graphics business segments. Products include modems, ISDN adapters, videoconferencing systems, ISDN routers, graphics cards and monitors. ELSA AG shares are trading on the Neuer Markt of the Frankfurt Stock Exchange since June 15, 1998.
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