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Tuesday, October 31, 2006

DivX Gets Dusted on Its First Public Earnings Release

DivX, Inc. (DIVX) is selling off after the company reported its earnings last night. The company posted quarterly consolidated revenue of $15.4 million, an increase of 83 percent from the third quarter of 2005. Net income in the third quarter of 2006 was $3.1 million, or $0.10 per diluted share, compared to net income of $763,000, or $0.02 per diluted share, in the third quarter of 2005. Stock-based compensation charges for the third quarter totaled $526,000 compared to $58,000 for the same quarter a year ago.

"We are very pleased to enter the public markets with a strong third quarter," said Jordan Greenhall, CEO and co-founder of DivX, Inc. "DivX continues to change the way that people experience media. Our success is shown by our expansion into new devices, partnerships and geographies, while our existing partners continue to grow their use of DivX technology. With more than 180 million downloads and over 50 million DivX Certified devices shipped worldwide, we believe that we are at the forefront of an exciting market opportunity."

The company also generated $3.5 million in new cash this quarter from operations.

DivX (DIVX) is trading Down 11.8% at $22.40 after the earnings. It appears that the street is doing some basic revenue calculations and determining that over 10-times revenues may be a bit steap.

DIVX was one of the recent Cramer calls that essentially went up about 30% on what can be attributed to his touting the stock as "The next Level 3" after he ran shares of LVLT up after it signed a supply pact with YouTube. Now before you go blame Jim Cramer for the weakness this morning and say yet another one of his picks is down huge overnight, he did initially call it a Buy well under even this lower level today, and he only took a week or two before he said to ring the register with it up so much in a short period of time.

DIVX is a very recent IPO and has a $18.00 to $26.74 trading range since its IPO.

DIVX also has a distribution pact with Google, and that contract's current end-date is said to be coming up very soon.

Jon C. Ogg
October 31, 2006
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