Avid Technology, Inc. to Acquire Pinnacle Systems

[BJ_M]

Combination to provide Avid with immediate presence in consumer video and expand professional broadcast offerings

Tewksbury, Mass., and Mountain View, Calif. 21/3/2005- Avid Technology, Inc. (NASDAQ: AVID) and Pinnacle Systems, Inc. (NASDAQ: PCLE) today announced that Avid has entered into a definitive agreement to acquire Pinnacle in a cash and stock transaction. Under the terms of the agreement, Pinnacle shareholders will receive .0869 shares of Avid stock and $1.00 in cash for each Pinnacle share. At closing, it is expected that Avid will issue approximately 6.2 million shares and pay $71.3 million in cash, for a total estimated value of $462 million based on Avid’s stock price of $62.95 at market close on Friday, March 18, 2005. Upon completion of the transaction, the 6.2 million shares to be issued to Pinnacle’s former shareholders will represent approximately 15 percent of Avid’s outstanding common stock. The acquisition is subject to satisfying a number of closing conditions, including shareholder and regulatory approvals, and is expected to close in the second or third quarter of 2005.

The purchase price represents a 30 percent premium over Pinnacle’s closing stock price of $4.97 on March 18, 2005. Assuming a closing date of July 1, 2005, Avid expects the transaction, excluding acquisition-related charges, to be dilutive to its pro-forma earnings per share in the third quarter and accretive in the fourth quarter, resulting in full-year 2005 pro forma earnings per share of approximately $2.70 per diluted share. In 2006, Avid expects the transaction to be approximately 10 cents accretive, resulting in pro forma earnings per share of approximately $3.20 per diluted share. After payment of the cash portion of the purchase price, Avid expects its cash position to be $280-$300 million at the end of 2005.

Following the closing, the parties expect that Pinnacle’s award-winning professional products – such as the MediaStream broadcast playout server and the Deko on-air graphics system – will enhance Avid’s end-to-end broadcast production pipeline, which has helped Avid become a global leader in that industry. In addition, Pinnacle’s consumer video business – which to date has shipped more than 10 million units – will form the basis for a new consumer video division at Avid, providing the company with an immediate avenue into that segment.

Avid president and CEO David Krall said, “We see this acquisition as the next logical step in our long-term strategy. Just as our acquisition of M-Audio in 2004 brought us into the consumer audio business, by acquiring Pinnacle’s consumer video business, Avid will be able to tap into the next generation of video editors while they are still learning their craft. This creates a very large potential customer base for Avid’s future. At the same time, we believe that Pinnacle’s professional broadcast offerings will fit seamlessly with Avid’s business, extending our end-to-end broadcast solutions with servers and on-air graphics products. We think it would be hard to find a more complementary match for these two businesses than what this combination provides.”

Krall added: “As a result of this transaction, we expect to derive savings from a number of sources, including reducing public company expenses, combining infrastructure functions where appropriate, and providing our global sales teams with a broader portfolio of product offerings. Over the past five years, Avid has increased its profitability and shareholder value by growing our top line, expanding our gross margins, and leveraging our talent and technology across the entire company. By working with the dedicated team at Pinnacle, we’re confident that, together, we can succeed with this same strategy following the completion of the transaction.”

Pinnacle chairman and CEO Patti Hart said, “We believe that this transaction creates significant value for our shareholders and provides excellent opportunities for continued growth for the combined company. Avid has built a strong, well-deserved reputation for efficient business management while continuing to live up to its tradition of technological innovation in the video and audio industries. By bringing our own award-winning products to the table – including Pinnacle Studio, Pinnacle Liquid Edition, and our broad array of broadcast systems – we’re confident that Pinnacle will strengthen and diversify Avid’s business. Our customers can also anticipate a richer set of offerings within an organization that will be even better positioned moving ahead. We see this as the right move for Pinnacle, and we look forward to joining the Avid family.”

The Boards of Directors of both Avid and Pinnacle have approved the definitive agreement. Avid will seek stockholder approval of the transaction at its annual meeting, and Pinnacle will hold a special meeting of shareholders to consider approval of the transaction. The dates of the shareholder meetings will be announced following completion of initial regulatory filings.

Conference Call
Avid and Pinnacle will hold a joint conference call and simultaneous webcast to discuss the transaction, including the estimated impact on Avid’s future results. The joint conference call will take place on March 21 at 8:30 a.m., EST, and will be open to the public. The conference call can be accessed from any U.S. or international location by dialing (913) 981-5558 and referencing confirmation code 7229543. The call and subsequent replay will also be available on the Avid and Pinnacle Web sites. To listen to the call or replay on Avid’s Web site, go to the Investors page under the Company menu at www.avid.com for complete details 10-15 minutes prior to the start of the conference call. To listen to the call or replay on Pinnacle’s Web site, go to the Investor Relations page under the About Us menu at www.pinnaclesys.com.

IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC

Avid plans to file with the SEC a Registration Statement on Form S 4 in connection with the transaction and Avid and Pinnacle plan to file with the SEC and mail to their respective stockholders a Joint Proxy Statement/Prospectus in connection with the transaction. The Registration Statement and the Joint Proxy Statement/Prospectus will contain important information about Avid, Pinnacle, the transaction and related matters. Investors and security holders are urged to read the Registration Statement and the Joint Proxy Statement/Prospectus carefully when they are available.

Investors and security holders will be able to obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus (when available) and other documents filed with the SEC by Avid and Pinnacle through the web site maintained by the SEC at www.sec.gov.

In addition, investors and security holders will be able to obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus (when available) and other documents filed with the SEC from Avid by contacting Dean Ridlon, Investor Relations Director for Avid at telephone number 978.640.5309, or from Pinnacle by contacting Deborah B. Demer of Demer IR Counsel, Inc. at telephone number 925.938.2678, extension 224.

Avid and Pinnacle, and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies in respect of the transactions contemplated by the merger agreement. Information regarding Avid’s directors and executive officers is contained in Avid’s Form 10-K for the year ended December 31, 2004 and its proxy statement dated April 16, 2004, which are filed with the SEC and available free of charge as indicated above. Information regarding Pinnacle’s directors and executive officers is contained in Pinnacle’s Form 10-K for the year ended June 30, 2004 and its proxy statement dated September 30, 2004, which are filed with the SEC and available free of charge as indicated above. The interests of Avid’s and Pinnacle’s respective directors and executive officers in the solicitations with respect to the transactions in particular will be more specifically set forth in the Registration Statement and the Joint Proxy Statement/Prospectus filed with the SEC, which will be available free of charge as indicated above.

About Avid Technology, Inc.
Avid Technology, Inc. is a world leader in digital nonlinear media creation, management, and distribution solutions, enabling film, video, audio, animation, games, and broadcast professionals to work more efficiently, productively, and creatively. For more information about the company’s Oscar®, Grammy®, and Emmy® award-winning products and services, please visit: www.avid.com.

About Pinnacle Systems, Inc.
Pinnacle Systems provides broadcasters and consumers with cutting-edge digital media creation, storage, and play-back solutions for use at Home, in the Studio and on the Air. Pinnacle Systems’ award winning digital media solutions are in use around the world for broadcast, video and audio editing, DVD and CDR authoring and on the Internet. A recognized industry leader, Pinnacle Systems has received nine prestigious Emmy® Awards for its technical innovations and carries this commitment throughout all of its product lines. For more information about Pinnacle Systems products and services, please visit: www.pinnaclesys.com. Pinnacle Systems, MediaStream, Deko, Pinnacle Studio, and Pinnacle Liquid Edition are trademarks or registered trademarks of Pinnacle Systems, Inc. or its subsidiaries in the United States and other countries.

© 2005 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film Composer, and Pro Tools are either registered trademarks or trademarks of Avid Technology, Inc. in the United States and/or other countries. Avid received an Oscar statuette representing the 1998 Scientific and Technical Award for the concept, design, and engineering of the Avid® Film Composer® system for motion picture editing. Digidesign, Avid’s audio division, received an Oscar statuette representing the 2003 Scientific and Technical Award for the design, development, and implementation of its Pro Tools® digital audio workstation. Oscar is a trademark and service mark of the Academy of Motion Picture Arts and Sciences. Emmy is a registered trademark of ATAS/NATAS. Grammy is a trademark of the National Academy of Recording Arts and Sciences, Inc. All other trademarks contained herein are the property of their respective owners.

Some statements in this announcement may be “forward-looking statements” for the purposes of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements, including but not limited to: (i) the possibility that the transaction will not close or that the closing will be delayed due to antitrust regulatory review or other factors, (ii) the challenges and costs of assimilating the operations and personnel of Pinnacle; (iii) the ability to attract and retain highly qualified employees; (iv) competitive factors, including pricing pressures; (v) reaction of customers of Pinnacle and Avid and related risks of maintaining pre-existing relationships of Pinnacle; (vi) fluctuating currency exchange rates; (vii) adverse changes in general economic or market conditions, particularly in the content-creation industry; and (viii) other one-time events and other important factors disclosed previously and from time to time in Avid’s and Pinnacle’s filings with the SEC and to be more specifically set forth in the Joint Proxy Statement/Prospectus to be filed by Avid and Pinnacle with the SEC. Avid and Pinnacle disclaim any obligation to update any forward-looking statements after the date of this release.

[BJ_M]

my own thoughts are that Pinnacle stock was doing a nosedive ...

their products are buggy and service seems to suck ...


now avid owns competing products to it's own -- and purchased for way to much money .. doesnt seem to make a lot of sense unless avid closes down the software NLE business and keeps the profitable broadcast component

[lordsmurf]

Exactly was I was about to say. Pinnacle blows and was already suicidal as far as I was concerned. They'd been in a nosedive for years now, financially, and in terms of product quality.

I can understand a company buying them out at a bargain price, to gut them for their remaining value, but this seems a bit high.

Then again, maybe my understanding of the numbers is off, and this is a bargain price. At any rate, I don't see the Pinnacle brand lasting now. Good riddance.

As I understand it, Pinnacle does a lot of broadcast and MPEG stuff ... maybe that's what Avid is really after.

[edDV]

WOW is all I can say.

I'm not sure Avid is capable of dealing with the consumer market. Buying Pinnacle only gets them distribution. Few Pinnacle products* measure up to Avid quality standards. This sort of like IBM (i.e. high service model) buying out Roxio (low end retail)

*exceptions: Cinewave, and upper range Deko.

[lordsmurf]

Oh ... I don't know. Avid has some consumer stuff too. Just not as much ... and theirs actually works.

Compare something like Pinnacle Studio to Avid Xpress. No contest.

Sonic owns Roxio. Or were you just making a random comparison?

[edDV]

I hope this means Avid will open up some west coast facilities.

Roxio is low quality retail and packaged OEM distribution similar to Pinnacle's products.

Sonic hasn't done much to improve Roxio. Sonic was already in the consumer business with entry products. I think they bought Roxio only to control and eventually eliminate a competitor.

Avid doesn't have a consumer line or consumer distribution. Their low end is prosumer Xpress DV.

[Cornucopia]

I wonder what AVID will do with their bundling of Sonic DVD apps with their stuff, since they now have Pinnacle's Impression ('Course that does need a LOT of updating/improving/debugging).

Scott

[ViRaL1]

Oh ... I don't know. Avid has some consumer stuff too. Just not as much ... and theirs actually works.

Compare something like Pinnacle Studio to Avid Xpress. No contest.

Sonic owns Roxio. Or were you just making a random comparison?

Not saying that I have experience with either product, but judging from the links in your post to each of those, you're comparing a $100 product to a $1000 product.

[proxyx99]

I second that. Not a good example at all. Pinnacle is a perfect opportunity for Avid to expand into a consumer market where they were simply not present. Studio may be buggy but there isn't many companies that have hardware AND software expertise comparable to Pinnacle both in enthusiast and broadcast market. Pinnacle Liquid is hands down the best and most powerful out-of-the-box NLE on the market beside AVID. Both companies want the same: Adobe Premiere off the shelf. There is also Ulead (Taiwan) and couple of smaller players (not a threat).
Pinnacle was the logical choice. You buy company if you want it out of the game or if you want to bet on it. You guys think that Avid advisors are totally dumb and to see things for what they are they need your advice? You think that you know something they don't?

Everyone knows that you buy when the stock is low, one more reason to make a cheap acquisition. I looked at the chart and didn't see any tumbling here, rather normal cycle in the "not-so-hot market" considering lack of new "hot" product additions in Pinnacle's offer (recycling of the same). All they need is a new boss and a kick in the ass, maybe couple execs fired...

[lordsmurf]

Avid Xpress has a free version too.
And the student discount version is about $200.

[SatStorm]

We know that pinacle sucks. The average user don't.

People know Pinacle. Avid is known only to advance / profs users.


IMO, Avid wish to expand.

[DokSoul]

I've had pinnacle studio 8 & 9 and have enjoyed both products. I find their editing one of the easiest to use...Ulead 7 sucks, TMPeg isn't easy either. For low end, low cost software, it works fine for me. I haven't had any lockups or other problems. I ensure I don't have any apps running in the background when working on video...a problem most people don't address when they start complaining about video sw. I don't jump to new releases, I wait until the bugs are worked out a little and then move. In general, I see that most new releases of software are buggy because of the nuances of everyones different hardware and software interplay....until you market the product and get a lot of feedback and complaints from users, you can't address all the issues...some programs due to the breadth of their offering, just see to interfer with other programs. I have produced many output dvds from my panasonic mini dv - I render my mpeg, but I use roxio to burn (I've just always done it that way as in early studio 8 my burner was not supported). Studio interfaces with it superbly and the output is high Q. I'm not sure that all you bashers of this software have really used it. But I am one of those who for the almost free price, with all their rebates, really like this software. Adding Avid professional quality to the formula will only make me more interested in the product...hope they can keep the price down though.

[BJ_M]

Oh ... I don't know. Avid has some consumer stuff too. Just not as much ... and theirs actually works.

Compare something like Pinnacle Studio to Avid Xpress. No contest.

Sonic owns Roxio. Or were you just making a random comparison?

Not saying that I have experience with either product, but judging from the links in your post to each of those, you're comparing a $100 product to a $1000 product.

avid has been HEAVLY discounting dv express ... last fall they were selling the retail package for about 2-300$ (and less through several programs - including for free) and they have a free version also (which is very crippled) ..

[BJ_M]

I second that. Not a good example at all. Pinnacle is a perfect opportunity for Avid to expand into a consumer market where they were simply not present. Studio may be buggy but there isn't many companies that have hardware AND software expertise comparable to Pinnacle both in enthusiast and broadcast market. Pinnacle Liquid is hands down the best and most powerful out-of-the-box NLE on the market beside AVID. Both companies want the same: Adobe Premiere off the shelf. There is also Ulead (Taiwan) and couple of smaller players (not a threat).
Pinnacle was the logical choice. You buy company if you want it out of the game or if you want to bet on it. You guys think that Avid advisors are totally dumb and to see things for what they are they need your advice? You think that you know something they don't?

Everyone knows that you buy when the stock is low, one more reason to make a cheap acquisition. I looked at the chart and didn't see any tumbling here, rather normal cycle in the "not-so-hot market" considering lack of new "hot" product additions in Pinnacle's offer (recycling of the same). All they need is a new boss and a kick in the ass, maybe couple execs fired...

Pinnacle Liquid is not even close to Sony Vegas in many respects - but it does have some really good features .. vegas also outsells Pinnacle Liquid 10 to 1 .... vegas 6 will also be out soon, which will really rock some boats ..

[rkgibbons]

Saying that Liquid Edition 6.0 doesn't compare to Sony Vegas is crazy talk. Liquid Edition is a very mature, very professional, and very powerful package. In many respects, it FAR surpasses Vegas, and having used both extensively I can't think of many things that Vegas does better (although I enjoy the sound editing capabilities of Vegas a bit more...)

In fact, you'd be hard pressed to find a single review of Liquid Edition that doesn't place it firmly at the top of the heap for video editing packages (or at least among the top 2 or 3 professional packages on the market).

Liquid Edition is certainly not a consumer level product though, so perhaps the comparison isn't all that fair. It has a fairly steep learning curve, and requires a very powerful PC, but the overall package is impressive.

Pinnacle has been known to produce some excellent products throughout the years -- but they've damaged their reputation by prematurely dropping support for products they no longer wish to develop (even though a large consumer base is still using them!)

Many of their hardware products have been top-notch (very much ahead of their time) -- but it always seemed that their software development (drivers, etc) failed to keep pace.

They made many enemies over the years (look at LordSmurf...he's about as anti-Pinnacle as you can get, and he never misses a chance to trash them)...but they've also made many fans (of their products, if not their company)

It'll be interesting to see how this sale develops...

[BJ_M]

Saying that Liquid Edition 6.0 doesn't compare to Sony Vegas is crazy talk. Liquid Edition is a very mature, very professional, and very powerful package. In many respects, it FAR surpasses Vegas, and having used both extensively I can't think of many things that Vegas does better (although I enjoy the sound editing capabilities of Vegas a bit more...)

In fact, you'd be hard pressed to find a single review of Liquid Edition that doesn't place it firmly at the top of the heap for video editing packages (or at least among the top 2 or 3 professional packages on the market).

Liquid Edition is certainly not a consumer level product though, so perhaps the comparison isn't all that fair. It has a fairly steep learning curve, and requires a very powerful PC, but the overall package is impressive.

Pinnacle has been known to produce some excellent products throughout the years -- but they've damaged their reputation by prematurely dropping support for products they no longer wish to develop (even though a large consumer base is still using them!)

Many of their hardware products have been top-notch (very much ahead of their time) -- but it always seemed that their software development (drivers, etc) failed to keep pace.

They made many enemies over the years (look at LordSmurf...he's about as anti-Pinnacle as you can get, and he never misses a chance to trash them)...but they've also made many fans (of their products, if not their company)

It'll be interesting to see how this sale develops...

Not crazy talk -- I moderate several NLE and film forums and I dont have to look far for the issues .. And as I said - Liquid has a lot of great features.
But it is a more of a nightmare install, a total system hog, does not play well with other apps, takes over your registery and system and associates all your files. As well as being not as stable as Vegas for long form work - or running multiple copies or network rendering. BUT it is faster than vegas in rendering.. Some say that it takes more clicks to do something in liquid , but i seem to think its about the same ...
They have version 6.1 which corrects a lot of small bugs and adresses some of these issues.. It IS a good program - but Pinnacle burned me so bad on some higher end editing equipment (20 grand) a couple years ago - I have a natural bias against them and it may cloud my views ....

[proxyx99]

Then just say it upfront that aou are biased (which is clearly visible!). Liquid is not meant for average Joe to put it beside MS Messenger, what are you talking about?
It is more powerful then Vegas and it IS meant for broadcast quality productions. Let's not mix steaks with hamburgers here. I often use Edition but it is (like Avid) not for everyone. All broadcast-world editors are a bitch to master, you know that, so be fair. You don't want to say that Avid is crap because it is not transparent and intuitive (which it is not!).

[Delerious]

vegas 6 will also be out soon, which will really rock some boats ..

Will there be an upgrade available for vegas 5 users?

J

[edDV]

vegas 6 will also be out soon, which will really rock some boats ..

Will there be an upgrade available for vegas 5 users?

J

Why would they not?

[maldb]

The whole key to this acquisition has been overlooked: entry-level users who will eventually upgrade. You start out with a Hyundai and as you progress, you move up to a BMW or Mercedes. That's what Avid is counting on. Once Studio users register their products, how long do you think it will be before Avid starts pushing their higher-end products on you - with hefty discounts? Avid is a well-run company run by some very intelligent execs. (I'm in a brokerage firm, and we kep track of them.) If they can get at least 1 out of 20 Studio users to upgrade, that's money in the bank "gravy" for them. Once former Studio users upgrade, they'll see just how good the Avid stuff is and good word-of-mouth is the stuff CEOs dream of. You can bet Avid went into this deal with their i's dotted and t's crossed - they did their homework. If they can improve Pinnacle's lousy tech support, pure gravy, baby...

[proxyx99]

No one has ovelooked anything. That is why high-end merges with broad-appeal to gain access to their customer base and push whatever they have to offer to make them spend more money. That means upgrade, upgrade , upgrade... even if you don't need that just upgrade one more time... It obvious and widely understood. But good you brought this up. The outcome may be as I said upgrade and forget Pinnacle or upgrade to a better Pinnacle/Avid product. In the second scenario that may mean more user friendly powerful apps. Time will show, but as I said that was the best Avid could do. At this price Pinnacle was a snatch 1/8 of what it was 5 years ago and roughly 50% of average in the last few. I like Pinnacle's no nonsense approach, all they need is keep customers with better quality control. Both supplement each other's product offering perfectly.

[BJ_M]

right now -- the word is that they will keep the products totally separate (including using competing products)


of course time down the road will be different ... i'm sure

[proxyx99]

They would be stupid to start dismantling Pinnacle. This is a diamond that needs to be polished...

[proxyx99]

...
Avid will be able to tap into the next-generation of video editors while they are still learning their craft. This creates a very large potential customer base for Avid's future. At the same time, we believe that Pinnacle's professional broadcast offerings will fit seamlessly with Avid's business, extending our end-to-end broadcast solutions with servers and on-air graphics products. We think it would be hard to find a more complementary match for these two businesses than what this combination provides.
...

Following the closing, the parties expect that Pinnacle's professional products, - the MediaStream broadcast playout server and the Deko on-air graphics system - will enhance Avid's end-to-end broadcast production pipeline. In addition, Pinnacle's consumer video business will form the basis for a new consumer video division at Avid, providing the company with an immediate avenue into that segment

http://www.cdrinfo.com/Sections/News/Details.aspx?NewsId=13004

That shows clearly that speculations in this thread about Avid "saving" Pinnacle were formed based on false premises. Seems that Avid is expecting to be greatly benefited by Pinnacle's legacy rather then the other way around. What can I say?
I told you so...

[BJ_M]

looks like they will then be shutting the doors on Pinnacle's high end NLE systems which compete with avid ..

typical

[overclockxp]

I use Pinnacle Studio 9 Plus. I like it compared to others I have used. Is it perfect? By no means. But it gets the job done. The newest version, 9.4 is very stable. But I will also admit that many times I felt like a beta tester.

[proxyx99]

BJ_M you missed the point. I'm really troubled by you trying to introduce your heavily biased point of view as a new religion. I think you should one more time, this time carefully read your initial submission as well as other source material.

I quoted Avid execs:

At the same time, we believe that Pinnacle's professional broadcast offerings will fit seamlessly with Avid's business, extending our end-to-end broadcast solutions with servers and on-air graphics products. We think it would be hard to find a more complementary match for these two businesses than what this combination provides.

or is it too early in a day...

[BJ_M]

proxy99 - i think you should understand the english language a bit better and lose the attitude and grow up.

"servers and on-air graphics products" DO NOT include Pinnacle's CinéWave, Chrome, Nitro. targa 3000 and Vortex (which is in direct competition to newscutter).

Yes - I am a bit biased against Pinnacle, i stated so.

But I lost close to 60,000$ with them - and I will not forget it.

[proxyx99]

BJ_M, I have no issue with English and couple other languages but thanks for the lesson. Nothing personal. All I want is that info in this forum is not becoming a misinformation. Some opinions of yours have personal bias that you are entitled to but if you initiate reporting of the news try to be objective and avoid poisoning others with your hatred towards some subjects. Your loss is sad. And it saddens me even more that you have been hit by Pinnacle so heavily.

So much so that the original loss as reported by you to be 20 grand rose during the short lifespan of this thread to 60. With this rapidly escalating costs I do understand you have reasons to be upset...
But this is no reason for spreading personal and unverifiable info. Unless of course you also submit your ledger here for viewing. Then some day we all may be on your side. Wouldn't that be great?

PS. you also moderate here... any ethical issues I've missed?