Grass Valley Group Questions & Answers
Index
The Company
- What is the charter of the Grass Valley Group Inc.?
The Grass Valley Group is focused squarely on making broadcasters
and video professionals successful as they transition to production
and distribution of digital content. Whether it's distributing
high-quality digital content over the air, through broadcast
facilities and across standard data networks, or providing the
industry's best video storage and production tools, the Grass Valley
Group's routers, switchers, modular, and Profile digital video server
products offer the solution.
To help broadcasters and video professionals exploit new digital
media opportunities, the entire Grass Valley Group router, switcher,
modular, and Profile digital video server lines are being refreshed
with products that offer superior technological breadth and that will
set new standards for flexibility, integration, and cost
effectiveness.
- How is this Grass Valley Group different from the original
company? Given the financial track record of the original company,
what about this one will better position it for success?
The Grass Valley Group, as a single, focused company, will not
be competing for resources with other businesses as part of a
portfolio company.
Also strengthening the position of the new Grass Valley Group
will be new products across all lines and a leaner cost structure.
A $60 million research and development investment made over the
past two years is resulting in the delivery of powerful new digital
products in the company's Grass Valley switcher, router, and modular
lines, as well as in the Profile digital video server line. These new
product introductions, which started at NAB '99 and will continue
through June of the year 2000, will offer capabilities that go far
beyond those of the first generation of digital video and audio
equipment. Industry excitement about these products is mounting. For
example, even before the new Kalypso(TM) Video Production Center family was
introduced, customer commitments for 15 Kalypso systems were in
place.
Much of the work in turning around the business has been
completed. We've consolidated manufacturing into one plant services
into one location at Nevada City, and streamlined our worldwide
distribution structure .The leaner cost structure has shaped a
focused, disciplined, and nimble entrepreneurial organization;
approximately 700 employees support this $250 million business
(~$333,000 per employee in annual revenue).That will make the
company competitive with the top 25 percent of companies in the
broadcast and video equipment industry.
- If the company is different, why are you using the old company
name?
The Grass Valley Group brand stands for technology leadership
and customer intimacy, and is the de facto standard for broadcast
industry support. The Profile server and Grass Valley switcher,
router, and modular products have an unassailable reputation with
broadcasters and an enduring legacy of leadership and excellence,
which is a critical advantage in today's dynamic broadcast and
professional video markets. The opportunities and challenges of the
conversion to digital technologies require a nimble, proven
innovator. The Grass Valley Group is that innovator.
- How does this new entity stack up in the market? What is your
overall market share?
Approximately $1 billion of Grass Valley equipment is installed
worldwide today, with nearly 80 percent of television signals
worldwide passing through it. The Grass Valley Group holds a
number-one or number-two position across all of its product lines.
The Profile video server enjoys a number-one position in both
market share and brand name awareness, according to independent
industry studies conducted by Cahners Publishing and Frost and
Sullivan during the past 12 months.
Grass Valley routers, switchers, and modular products are number
two in their respective markets. Recent product introductions across
all of these product lines give the Grass Valley Group reason to
expect to see number-one positions being secured, and those products
in number-two positions moving toward number one.
- Why create a new entity -- why not simply merge with an existing
broadcast equipment supplier?
Creating a new entity provides a much better foundation for the
large number of new products which we're introducing. The flexibility
and focus offered by forming a new company gives us a better
opportunity to be number one in all the markets that we serve.
- How are customers reacting to this announcement?
Very positively, as evidenced in the four quarters of steady
growth which this organization realized as a division of Tektronix
prior to the announcement of its formation as an independent entity.
In fact, the fourth quarter of fiscal year 1999 was one of the
organization's strongest, with 20 percent growth in orders. All of
this occurred despite widespread speculation about the future
business structure of the company.
- Where will Grass Valley Group Inc. be located?
Headquarters of the company will be in Nevada City, California
(northeast of Sacramento), with engineering design centers in Nevada
City and in Beaverton, Oregon. The new company's on-going digital
broadcast and video product development efforts will continue to be
supported by the Tektronix software development center located in
Bangalore, India. European headquarters for Grass Valley Group will
be in London, England, with sales and technical support in Paris,
France and Cologne, Germany. The Asia/Pacific market will be supported
from Tokyo and Hong Kong.
- What impact will this transaction have on the local economy?
Most of the Grass Valley Group's domestic operations will be
consolidating in the Nevada City/Grass Valley area. (A core group
of Profile engineering and marketing staff will remain in Beaverton,
Oregon.) It is expected that approximately 50 families will be
moving into the area. The increased presence of the Grass Valley
Group in the greater Grass Valley/Nevada City area is expected to
have a positive impact on the local economy.
- What is the distribution of Grass Valley Group personnel worldwide?
The Grass Valley Group has more than 700 employees worldwide:
550 in the US and the Americas; 100 in Europe; and, 110 in the
Pacific Region. Of those employees supporting Grass Valley Group
product development efforts in the Pacific Region, 60 are employees
of Tektronix software development center in Bangalore, India.
- Will there be layoffs associated with this transaction?
We have been restructuring the business in preparation for the
sale to obtain a leaner cost structure. We will continue with those
planned actions, which include limited additional layoffs.
- What kind of on-going relationship will the new company have with
Tektronix Inc.?
Tektronix Inc. maintains a 10 percent equity position in the Grass
Valley Group.
Grass Valley Group is executing cross-license agreements with
Tektronix to enable the companies to share technologies of common
interest easily, and is participating in current and emerging
opportunities in the broadcast-equipment and related markets.
- Why is Tektronix getting out of the video business?
Strategically, Tektronix wants to play in different markets --
test and measurement and color printing. Over the past couple years,
Tektronix has invested approximately $60 million in broadcast and
video research and development. The Grass Valley Group will maintain
that effort.
- What happens to the strategic alliance with Avid Technology? What
about Avstar?
Avstar LLC is a newsroom computing company launched by the
Tektronix Video and Networking Division and Avid approximately 11
months ago. The Grass Valley Group, with its 100 percent focus on
broadcast and professional video markets, is continuing to support
the strategic alliance. Both companies believe that it is in the
best interests of the broadcast industry to not only maintain this
alliance, but to broaden it -- that is, a broader distribution
model for Avid, and the ability for the Grass Valley Group to
provide more editing solution options for news-based clients.
Avstar is 50 percent owned by the Grass Valley Group and Avid
Technology. Further questions about Avstar should be directed to
Matt Danilowicz, president and CEO of Avstar.
Q&A Index
The Transaction
- What are the financial details of this transaction?
- What specific assets is the Grass Valley Group purchasing from
Tektronix?
The Grass Valley Group is acquiring the assets of Tektronix'
video content production business. These Emmy® award-winning broadcast equipment brands
and products include the Profile® digital video server and the Grass
Valley(TM) router, switcher, and
modular product lines. Tektronix' extensive video content intellectual
property portfolio is also included in the transaction. Approximately
700 employees of Tektronix video content production business are
now employees of the Grass Valley Group.
- How stable is the Grass Valley Group?
Very.
The acquisition is being financed by an investor group led by
Dr. Terence J. Gooding, an entrepreneurial industrialist, and Tim
Thorsteinson, currently president of Tektronix Video and Networking
Division (VND). Gooding will serve as chairman and chief executive
officer of the Grass Valley Group, while Thorsteinson will serve as
the new company's president and chief operating officer. Key
engineering, sales, service, marketing, and finance executives
currently with VND will continue in the new business.
Currently, Gooding also is co-chairman of the board of Wavetek
Wandel Goltermann Inc., the second largest international
communications test company worldwide. Over the past 35 years,
Gooding has successfully led five technology companies through
product development and complementary acquisitions into growth
markets. He has built two small companies to more than $1 billion
in revenues annually.
The transition to digital creates an opportunity for more
leadership for the Grass Valley Group: the Profile video digital
server and the Grass Valley switcher, router, and modular products
all hold a number-one or number-two market positions. Leveraging
an entirely new line of server, switcher, router, and modular
products, the Grass Valley Group will expand this leadership in
the growing broadcast and professional video equipment market which
is expected to require more than $10 billion of new equipment over
the next decade.
- How financially stable is the Grass Valley Group?
This transaction is being financed by Dr. Gooding and prestigious
individual bankers who are from around the world and who have
significant contacts within the communications industry.
- Will the new owner remain involved as a longer term value player
-- or is this a more opportunistic situation?
Dr. Gooding, as evidenced by his track record with the businesses
he has started, built, and managed, and Tim Thorsteinson, a seven-year
veteran of Tektronix as a member of the company's senior management
team, are committed to the long-term growth and success of the Grass
Valley Group. As well, Larry Neitling continues to run operations in
Grass Valley, Greg Wasche continues to run Profile engineering,
and
Russ Johnson continues to run sales operations in the Americas.
- Will Tektronix have a stake in the Grass Valley Group?
- Why is Tektronix retaining the assets of the Videotele.com
business?
The Videotele.com business' focus on providing video streaming
solutions to strategic network and service providers aligns well
with the increased focus on telecommunications within Tektronix
Measurement Business Division.
Q&A Index
The Players
- Who is on the management team of the Grass Valley Group?
- Dr. Terry Gooding, Chairman of the Board and Chief
Executive Officer
- Tim Thorsteinson, President and Chief Operating Officer
- Larry Neitling, Grass Valley Operations
- Greg Wasche, Profile Engineering
- Russ Johnson, The Americas Sales
- Stephen Wong, Pacific Region Sales
- John Phipps, European Sales
- Jim Sakaguchi, Worldwide Service
- Mike Cronk, Profile Marketing
- Brian Cabeceiras, Grass Valley Sales Operations,
Marketing, and Systems
- Sam Dunne, Human Resources
- Laura Barber-Miller, Public Relations & Executive
Communications
- What kind of expertise or insight into the broadcast industry
does the new ownership have?
Dr. Gooding has been involved in the management of technology
companies since 1965. Included in these were Wavetek (now Wavetek,
Wandel, Goltermann), the world's second largest test and measurement
instrumentation company, and Leica plc., one of the world's largest
optical and scientific instruments. The new ownership feels the
business is headed in the right direction. Dr. Gooding's business
expertise will only strengthen this direction.
- How will the transition from being part of Tektronix to being an
independent company be handled? How long will this process take?
Both companies are working cooperatively to close the transaction
by the end of September and to ensure a smooth handoff between their
worldwide engineering, sales, service, and marketing teams. In
addition to a US-based call center, certified system engineers
and authorized service Grass Valley Group will also create a new
Web site to provide direct access to online technical help, part
ordering, software maintenance releases, release notes, and
manuals.
Q&A Index
The Market
- What primary markets will the Grass Valley Group serve?
The Grass Valley Group continues to focus on the broadcast and
professional video markets with its award-winning routers, modular,
and switcher and Profile digital video server products.
- What is the current state of those markets?
In general, we are upbeat about the digital adoption trends we
see worldwide. The European Economic Community has led the worldwide
transition to digital by about two years. In the fourth quarter of the
fiscal 1999 year, for example, Profile digital video server orders
grew by 165 percent in that region. In fact, the European nations
were early adopters of the Profile line. In the US, broadcasters
have for the most part assessed what the digital transition will
cost them. Now, they're beginning to implement some of these
changes -- with a clear understanding of the transmission and
infrastructure expense models needed for the next 12 months. While
the rate of adoption is not as rapid in Asia, the region is
experiencing an up-tick in digital product orders.
- How does the Grass Valley Group intend to stay competitive in
those markets?
New products and customer intimacy.
The company continues to invest in Profile and Grass Valley
research and development, and to accelerate the development and
delivery of new, powerful, and innovative products.
As important, the company continues to strive to provide the
best-in-industry support of our customers, and make their
requirements our number-one priority in the products and services
we provide.
Overall, our hope for the industry is as smooth a transition to
digital as possible. We believe that the technological keys to
effecting such a transition are increased connectivity or
networking; more applications and more format choices; greater
bandwidth and the ability to multi-purpose content; increased
automation; and, rapid access to content on a global basis. These
are qualities which customers will see in our products going
forward.
- How does the Grass Valley Group intend to expand/create new
markets, including those defined by broadband and Internet
technologies?
As the transition to digital production and transmission takes
hold, many broadcast organizations are transforming themselves
into media companies capable of delivering content to multiple,
digital pipelines in applications for exciting new market ranging
from the Internet to e-cinema.
The Grass Valley Group's long-term roadmap will take these
developments into account: its new products will support customers
as they develop and brand high-value content, regardless of its
ultimate digital destination, and make the Internet and similar
data services a vital part of their business models.
Q&A Index
The Products
- How competitive are Grass Valley Group products in their respective
markets?
According to both industry and internal analysis, the Profile
line of digital video servers holds the number-one position in
its market. The Grass Valley modular, switcher, and router products
hold the number-two position in their respective markets.
- What specific research and development efforts have been
undertaken to ensure the future competitiveness of these products?
Over the last two years, $60 million has been invested in research
and development. The fruits of that effort will be borne out in the
introduction of next-generation digital media solutions across all
Grass Valley Group product lines--solutions that underscore the
company's leadership in understanding both the current and future
needs of its customers.
- What is the significance of the recently announced Kalypso
Video Production Center line?
The Kalypso Video Production Center family is the most
self-contained, powerful and cost-effective solution for controlling
teleproduction environments--one that supports standard-definition
(SD) today and that will be capable of supporting high-definition
(HD) in the future. It also exemplifies the kind of innovation
and forward-thinking leadership that the Grass Valley Group will
demand of itself and offer its customers.
- How is the Profile video server family keeping pace with the
changes and opportunities in digital broadcasting and
distribution?
This year's National Association of Broadcasters (NAB) convention
saw a demonstration of a multi-channel Profile digital video server
that cost-effectively stored HD material at rates up to 80 Mbps
using MPEG2@HL. The Grass Valley Group continues to explore ways to
imbue the Profile line with more bandwidth, more networking features,
and an increased ability to distribute digital content through
myriad pipelines. Any announcements regarding the future product
strategy for the Profile line will come later this year.
- What about other products such as routers and converters--how
are they faring?
Fifteen new Grass Valley modular products have been introduced
since January, making a total of 24 modular product introductions
in the last 12 months. At this year's NAB, a new Grass Valley
narrowband audio routing system was unveiled. A new addition to
the Grass Valley router family will debut at this year's
International Broadcasters Conference (IBC) in Amsterdam, The
Netherlands.
Q&A Index
The Future
- Does Grass Valley Group intend to acquire new products,
technologies or companies?
Grass Valley Group will always look for ways to strengthen the
business. The company's short-term plan is to complete the
introduction of new solutions across all its product lines by June
of 2000. Management of the company currently has no immediate,
further acquisition plans. However, Grass Valley Group management
always is looking for ways to strengthen the company. Management
will remain watchful for new technologies and opportunities that
will help the Grass Valley Group better serve current and pursue
emerging markets.
- Does the Grass Valley Group intend to divest itself of any of
its newly acquired assets?
- How much revenue does Grass Valley Group expect to generate
in its first year?
- Does the Grass Valley Group have plans to make an initial public
offering of stock?
No. For the foreseeable future, Grass Valley Group will remain a
privately held concern.
- Does the Grass Valley Group intend to remain primarily located
in the Grass Valley/Nevada City area?
Yes. As a global concern, Grass Valley Group will operate in
locations that can best capitalize on available talent.
Specifically:
- Executive staff and key managers and personnel will work from
Nevada City, California at the current Grass Valley site;
- The Profile team, with approximately 100 engineering and
marketing personnel, will operate from Beaverton, Oregon;
- A software design team, with approximately 60 employees, is
operating from Bangalore, India;
- North, Central and South American sales, service, and technical
support will operate out of Nevada City;
- European, Middle Eastern, and African sales, service and
technical support will operate out of London, England; Paris,
France; and Cologne, Germany; and,
- Pacific Region sales, service and technical support will come
from Tokyo and Hong Kong.
Q&A Index
For the latest Grass Valley Group product information, see
www.grassvalleygroup.com.
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