EFI President Dan Avida will not soon forget Friday, December 12 1997. On that day, the EFI share on Wall Street plunged 60% within minutes, from $40 to only $15. Dumbfounded, Avida could not believe his ears. "Fifteen dollars? Can't be! Check the share price again", Avida told a NASDAQ trader that morning, who called to give him the latest on the share price at the start of trading.
EFI, which until then had traded at a market value of $3 billion, fell, within minutes, to just $800 million. The collapse followed the company's announcement of a dramatic worsening of its results in the fourth quarter, due to the East Asian crisis, which was then starting to impact US companies.
It was an unfortunate combination of circumstances that brought EFI so low, consisting of the deepening financial crisis in Japan, where EFI has most of its large customers, and the company's delay in getting new products to market.
Until then, EFI had been seen as one of the fastest growing companies in Silicon Valley, posting an annual growth rate which peaked at 65%. For twenty five successive quarters, EFI's revenues grew steadily and consistently, reaching an annual record of $400 million, and confounding analysts' forecasts time after time.
EFI, maker of colour servers that enable photocopiers to be converted into printers, was founded ten years ago, by Efi Arzi, when he left Scitex.
EFI's sales fell in Q4 1997 because the company was behind schedule in launching its new product series, headed by the Fiery ZX server, which addresses the high end market. This product was finally launched at the beginning of 1998, and its steadily mounting sales were largely responsible for the company's business turnaround in recent quarters, and for its getting back on a fast growth track.
EFI's revenues, which in Q4 1997 tumbled to a $60 million low, posted steady growth in the two succeeding quarters. But the big step up came in the third quarter, when revenues reached $125 million, back to their level of the record growth years.
Net profit kept pace, amounting, in the last quarter, to $16.5 million, compared to less than $7 million just one quarter earlier. Per share profit came to $0.31, outdoing Wall Street analysts' forecasts by $0.05.
The EFI share, which, in October, was trading at a mere $15, exactly the same level as after the great 1997 crash, has since posted a cumulative advance of 147%, reaching $38 yesterday, which reflects a market value of $2 billion.
Yet despite the positive market response, the share only recently managed to break the $30 barrier, doing so with the generous assistance of Alex Henderson of Prudential, the printing world's leading analyst, who in recent weeks had been enthusiastically issuing the share Strong Buy recommendations, one after the other.
Henderson outdid himself yesterday, when he raised the share's target price from $35 to $45. Henderson gives his opinion, in last night's recommendation, that EFI will go on beating analysts' forecasts in the next few quarters.
EFI President Dan Avida yesterday told "Globes" that EFI's recovery this year, and its success in returning to an accelerated growth track, were due not only to the launching of the Fiery ZX colour server, and that product's successful market absorption, but also to the launch of new products in fields in which the company did not operate hitherto.
How, we asked, does Avida explain the fact that the EFI share made its real recovery only recently, even though revenues and profits shot up and the company resumed its erstwhile growth rates in the third quarter. "The market responds to bad news quickly", Avida said, "while good news takes time to percolate through to the market, and that is evidently what is happening now".
One of the main causes of EFI's success in bringing its annual revenues back to the $400 million level was its improved sales in Japan, which shot up by 44% in the last quarter, largely at the expense of US company Splash Technology which simultaneously reported a substantial deterioration in its Japanese business.
Splash was hitherto regarded as EFI's principal competitor, and recent developments seem to provide further reinforcement for EFI's world leader status in colour servers. Avida himself notes the fact. "All our competitors", he says, "are actually dwarves. Splash is the biggest of them, but cannot significantly threaten us at present any more than our other competitors".
According to Avida, Japanese companies today contribute 50% of EFI's revenues. Avida, however, is not worried, on that account, that last year's horrific scenario may repeat itself. This is evidently due to the successful market absorption of the company's new products and the fact that it has even managed to boost sales on today's severely recessive Japanese market.
Apart from which, it is important to note that most of EFI's ultimate customers are not actually in Japan but in the United States and Europe (where large Japanese companies market EFI's products). According to Avida, the market share of EFI's ultimate customers in Europe and the United States has become even larger, at the expense of customers in Japan, which, he says, currently contribute less than 20% of the company's revenue.
Thirty five year old Dan Avida, for years seen as being groomed by Efi Arzi, replaced him as company president five years ago, and Arzi today holds no office in the company. When EFI was founded, ten years ago, it was obvious that Arzi had deliberately arranged for the company's name, "Electronics for Imaging", to boil down to the "EFI" acronym. But when we used that name today, Avida corrected us. "The company's name is not EFI, but "E.F.I.", he said, volunteering no explanation.
Published by Israel's Business Arena December 30, 1998