The promise of video on demand remained an apparition for most of us. The media industry has toyed with the technology for years, but the broader infrastructure has been a key constraint. But as more consumers sign up for a high-speed Internet connection, the promise may soon become reality. Little-known Virage, Inc. may be an intriguing way to play the sector. The company has built a 200-strong client base of traditional media companies. Virage’s software facilitates video transmissions over the Internet. And while other Internet-oriented firms have witnessed a sharp drop in sales, thanks to slowing investments in infrastructure, Virage has been able to maintain heady growth: the company exceeded quarterly estimates in January and is confident that sales will more than double again in Fiscal 2001. Admittedly, the tech slowdown has brought down growth estimates from even higher levels, but Virage continues to add a series of key new customers that should drive the top line. For example, Sumitomo has partnered with Virage to roll out the technology in Japan. Mediaset, Italy’s largest broadcaster has inked a similar deal that should help spur European sales. And major League Baseball just awarded the company it’s largest contract ever to help roll out streamed baseball games. Management now thinks those deals should help Virage become profitable by late next year. In the interim, cash shouldn’t be a problem as the company has $54 million sitting in the bank. That’s nearly two-thirds of the company’s market value. That market value has shrunk considerably as the shares have fallen from $30 to a recent $3.62. Spotting a bargain, a Director recently bought 135,000 shares of Virage at $4.03 a share.
Virage wants to take the guesswork out of streaming video. The company makes software that enables users to deploy, search, index, and manipulate video content over the Internet. Virage’s software breaks video into discrete indexed segments, creating a database that can be searched by users. Companies use Virage’s software to manage incoming video and create digital libraries, eliminating the need for videotapes. Customers can license the company’s software to offer video directly over the Internet or rely on Virage for outsourced video management services. Database management software bigwig Oracle accounts for about 10% of sales. Shareholders include Akamai, AltaVista, and Reuters.
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