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Cinram banks on Blu-ray growth after poor quarter results

Last week, Cinram International Income Fund reported a fourth quarter 2007 net loss of $317 million, primarily attributable to the booking of a $386-million impairment charge (write-off of worthless goodwill such as acquisitions). Revenue for the quarter climbed to $696.2m from $616.7m. For the full year, while revenue rose to $2 billion, up from $1.9 billion the previous year, Cinram lost $301.1m.

The company did not specify what the impairment charge entailed, but the overall writedown included $55.8 million related to property, plant and equipment and $16.8 million from "intangible assets."

Cinram trust units plummeted from a 52-week high of $30 to as low as $4.90 after the company suspended payouts to investors last November because of weak sales. Cinram worked to offset this by picking up Ditan Corp, a major US software and games distribution company that provided a stake in the thriving video games business.

Cinram CEO Dave Rubenstein expressed hope that a winner in the format war would help the replicator grow its already large home video segment. “We have some Blu-ray capacity in place today,” Rubenstein told The Associated Press. “As Blu-ray becomes more of a common mass-market item, then I think the stores will convert over shelf space from standard-definition DVD to Blu-ray.” Though he does not think there will be any near-term change in the shelf space allocated today.

Cinram was working with both HD DVD and Blu-ray, and Rubenstein told the AP he did not believe Cinram would be adversely affected by HD DVD’s demise. “The nice thing about HD [DVD] was that the lines are very capable of making DVDs with zero modification, so there’s very little equipment that will be made redundant,” he said. “We can even repurpose the quality-control equipment from HD [DVD] to Blu-ray, so there’s very little that will become obsolete.”

Story filed 10.03.08

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