ViewSonic: Quite The Financial Display

In case you haven't noticed, for the past few months money has been flowing like water into the channel and the overall IT sector. Whether it's private equity moving in to purchase CompuCom or investor interest in high-tech IPOs, there is enough liquidity floating around to drown a fish. The latest company to try and ride this wave is ViewSonic, which is an interesting blend of distributor, R&D machine, sales driver and marketing innovator all coming together to sell display systems to a network of VARs and retailers.

Even though the company has posted its top-line financial results for several quarters, it fully disclosed its financial performance in its IPO filing with the Securities and Exchange Commission. The results were impressive. ViewSonic's business model centers around sourcing parts from major Taiwanese and offshore manufacturers and then selling fully configured display systems—monitors, digital signage or projectors—through a loyal channel.

ROBERT C. DEMARZO Can be reached via e-mail at rdemarzo@cmp.com.

In 2006, the company posted sales just shy of $1.6 billion, a 32 percent surge over the prior year's $1.2 billion. Its 2006 sales efforts produced a fairly slim net profit margin of 1.5 percent, or $24.2 million, a turnaround from the $8.3 million the company lost in 2005. So its results do bear some resemblance to giant distributors like Ingram Micro and Tech Data, which strive for net profit margins of 1 percent. For the first quarter, ViewSonic's sales surged some 25 percent over the same quarter last year, translating into a surprisingly healthy market for all of these digital display products.

Certainly, any VAR looking at these financial results has two things to consider: First, is this a company worth investing in? And second, are your display sales growing at a 25 percent clip or better?

While pondering those questions, just think of the price pressure that ViewSonic founder and majority owner James Chu must cope with every day. The company's average selling price of its LCD monitors declined by 21 percent in the first quarter, and it doesn't see any letup in the near future. So through Chu's lifelong efforts, the company has developed into a master of increasing unit shipments to outpace the average selling price decline. For instance, in the first quarter of this year, its total unit shipments surged 43.5 percent compared with a year ago—with shipments of LCD monitors alone surging 72 percent. You just wonder how long the company can maintain that pace.

ViewSonic has an opportunity to use the IPO proceeds to distance itself from main competitors NEC and Samsung, among many others. It certainly has momentum behind it and is in a market that's undergoing a major transformation whether it's in the LCD TV, digital signage or projector market.

WHAT'S YOUR TAKE ON DISPLAYS? AND DO YOU THINK VIEWSONIC IS A GOOD BUY? CMP CHANNEL EDITORIAL DIRECTOR ROBERT C. DEMARZO IS AT RDEMARZO@CMP.COM.