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DVD, Blu-ray discs are silver lining on Technicolor's dark Q3 revenue clouds

In the third quarter of 2011, Technicolor’s Group revenues from continuing operations amounted to €837 million, down 9.0% at current currency and down 7.4% at constant currency compared to the third quarter of 2010.

Technology revenues: Those revenues declined by 25.1% year-on-year at constant currency in the third quarter of 2011– €126 million v €107 million. Licensing revenues decreased by 25.7% compared with a strong third quarter in 2010, which had benefited from solidg growth in worldwide consumer electronics product shipments and the outcome of audits of past product volumes for certain MPEG LA licensees.

During the third quarter of 2011, the transfer of technology from Research & Innovation to other businesses focused on rendering content more attractive and valuable to customers, whilst ensuring a guaranteed, consistent level of quality. In particular, new tools for in-painting, which is one of the most time-consuming steps in 2D to 3D conversion, were transferred. R&I has created novel quality-sensitive acceleration techniques in two areas: automatic clean plate creation algorithms to replace foreground objects with appropriate background, and user-assisted hole filling methods to complete never-seen portions of the image.

Entertainment Services: The biggest segment of Entertainment services are discs, and the news here is very good. In the third quarter of 2011, combined DVD and Blu-ray volumes increased by 22% to 418 million units as compared with the third quarter of 2010 (342 million units). Excluding the impact of the Warner Bros. contract, which started in August 2010, total volumes recorded a fourth consecutive quarter of year-over-year growth.

Breaking down total disc production, DVD units grew from 291m in Q3 2010 to 349m this last quarter. Blu-ray discs units rose from 27m to 44m. Games software grew from 24 to 26m.

In the context of lower consumer confidence in Europe and in North America, the company says it was able to increase its level of activity. This performance was driven by a variety of factors including market share gains, continued growth in the Blu-ray format and ongoing resiliency for DVD.

DVD and Blu-ray volume demand also benefited from a strong release slate across key studio customers, with titles such as Walt Disney’s Cars 2, Paramount’s ,em>Thor, Universal Pictures’ ,em>Bridesmaids, and Warner Bros.’ ,em>Green Lantern. Games and Software also contributed to quarterly growth, with combined volumes from these segments up 19% year-over-year.

Digital Delivery: In the third quarter of 2011, Digital Delivery revenues amounted to €288 million, down 20.1% at current currency compared to the third quarter of 2010 (€360m).

Digital Delivery revenues decreased by 17.6% year-on-year at constant currency in the third quarter of 2011, as a result of a drop in global shipments of Digital Home Products, due in particular to continued market weakness in Europe partially offset by growth in Latin America and a more favorable overall product mix compared with the third quarter of 2010.

Technicolor’s outlook for FY 2011 points to market conditions that have particularly worsened for Digital Delivery over the course of the third quarter of 2011 and expect a continued deterioration to the end of the year. In this environment, the segment will report performances below the group's expectations on a full year. As a result, the the company has implemented an organisation and management change in Digital Delivery and intends to return this activity to profitability in 2012.

On the other hand, Technology and Entertainment Services are expected to continue their strong performance, despite more challenging market conditions.

Story filed 10.11.11

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