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Thursday, March 15, 2007, 08:00 am PT (11:00 am ET)

Avid investors prepped for Apple surprises at NAB

Investment research firm PiperJaffray on Thursday cautioned shareholders of video production firm Avid Technology, Inc. that shares could experience some short-term volatility should Apple Inc. pull something from its sleeve at next month's NAB conference.

Sr. Analyst Gene Munster, who maintains an outperform rating on shares of Avid, told investors that the "talk on the Street" is that Apple is planning an event for April 15th at the National Association of Broadcasters (NAB) conference in Las Vegas, Nevd.

"At last year's NAB, expectations were that Apple would announce a high end version of Final Cut, but this did not materialize," he said." We believe that there is a greater than 50 percent chance that if Apple holds a special event at NAB, it will be the venue for this announcement."

Munster in a note to investors acknowledged that there is likely to be concern over what Apple may be holding, but said he does not believe a higher end version of Apple's Final Cut would end up significantly impacting Avid's pro post production business.

"Don't expect Avid Pro users to flock to Apple if a high-end version of Final Cut is announced," the analyst wrote. Although higher-end version of the Apple video editing software would likely offer a 15 to 20 percent price advantage over similar Avid software, surveys have shown that Avid Pro customers are less sensitive to price and more sensitive to brand and familiarity.

A recent study conducted by PiperJaffray of 161 post production professionals found that of those using an Avid system, only 6 percent were willing to consider switching to Apple in the next 12 months. Many others said they were not interested in switching to Apple, as Avid systems are what they've known for years. Several Avid Pro users also noted that "Avid is what professionals use, while Apple is what consumers and 'prosumers' use."

In his note to investors, Munster concluded that the Avid story is far from "squeaky clean," but said he believes it is getting closer to becoming a stable growing business again.

"While a high end version of Apple's Final Cut could be on par with Avid in many respects as far as functionality, Apple would be fighting a perception issue that pro editors have, as well as a loyalty to what they and the industry have been using for over a decade," he wrote.