Media Vision Skid Continues on News of FBI-SEC Probe : Technology: Firm is investigated for alleged securities violations. Stock hits $2.875 a share after peaking at $46.50 in January.
The stock of Media Vision Technology Inc., a once-high-flying maker of video and sound products for computers, plummeted Monday after the FBI and the Securities and Exchange Commission acknowledged that they have launched an investigation into alleged securities violations.
More than 4.3 million shares of the Fremont, Calif.-based company changed hands in Nasdaq trading, tumbling $1.75 each to $2.875.
The sharp selloff, from a high of $46.50 in January, has erased more than $600 million of market value for Media Vision, which has dropped a series of bombshells in recent weeks. The company’s fall from grace sent a strong signal that, promising as it is, the so-called multimedia market requires that investors do their homework.
Media Vision already faces several shareholder class-action suits alleging that company executives misled investors about performance and the likelihood of future success.
In March, Media Vision reported that it would revise figures for 1993, including its record sales volume of $241 million, and take a sizable loss for the fourth quarter, for which it initially had reported an $8.5-million profit. The company blamed price cuts and shipment delays. Last week, it laid off 50 employees, 15% of its work force.
Monday’s stock collapse followed a report in the San Francisco Chronicle that the company was under investigation because of allegations that executives had repeatedly falsified sales records and engaged in other shoddy or illegal business practices.
“We do have an investigation of Media Vision,” Rick Smith, an FBI spokesman in San Francisco, said Monday. He said the investigation is being conducted jointly by his agency, the SEC and the U.S. attorney’s office in San Francisco.
On Monday, Media Vision spokeswoman Elizabeth Fairchild said, “We’re aware that there is some sort of investigation.” She added that “we’re still in business.”
Media Vision, established in 1990, makes sound cards and multimedia kits that enable computer users to run educational and entertainment software in CD-ROM format. It also publishes CD-ROM games, including “Critical Path,” “Forever Growing Garden” and “Always Arthur.”
Media Vision’s troubles are bad news for Montgomery Securities, a San Francisco-based brokerage that has aggressively underwritten securities sales for hot high-tech ventures. Montgomery was Media Vision’s lead underwriter when the company went public in 1992 and backed a $75-million debt offering late last year. Montgomery representatives would not comment Monday.
“It’s additional evidence that where there’s lots of money to be made, there’s also lots of money to be lost,” said Dan Case, president of the Hambrecht & Quist investment firm in San Francisco. “Multimedia is still a very exciting business opportunity, but one where due diligence is required.”
Paul Jain, 48, Media Vision’s founder and chief executive, has a mixed history as a Silicon Valley entrepreneur. A tennis enthusiast born in New Delhi, Jain (pronounced Jan) attended college in Vienna before immigrating to the United States to earn two degrees in computer science at UC Berkeley.
A previous Jain start-up, Video 7, a maker of computer graphics circuit boards, was sold to LSI Logic in 1989. Dismayed to discover vast amounts of unsold inventory, LSI fired Jain and later sold the company.
In March, Jain touted Media Vision’s rosy prospects to investment analysts just eight days before disclosing that the company would have to revise its figures.
Industry analysts said Media Vision encountered troubles because it failed to adapt to a shift in the market. Home computer users, who early last year clamored for Media Vision’s multimedia kits, found them tricky to install. Once powerful new machines with sound and video capabilities built in popped up at competitive prices, many users chucked old systems for new.
Whereas Media Vision clung to multimedia kits--including CD-ROM players, speakers and sound cards--Creative Labs, the market leader, began manufacturing more multimedia components for big computer makers such as IBM, Compaq and AST. Milpitas, Calif.-based Creative Labs is the U.S. arm of Singapore-based Creative Technology and makes Sound Blaster brand products.
Dataquest Inc., a market research firm, puts Creative Labs’ share of the sound board market at 70%. All told, Dataquest projects this year’s market for multimedia computer systems and sound boards at $7.3 billion, up from about $6 billion last year.
Bruce Ryon, a multimedia analyst at Dataquest, said the Media Vision fiasco will help inject some sanity into all the multimedia hype.
Stock Plunge
Media Vision Technology Inc. was one of Wall Street’s darlings, with a product line including devices that enabled personal computers to emit stereo sound. But this year Media Vision shares began a long slide that culminated Monday in an investigation of possible securities violations.
Weekly Stock prices, except latest:
Jan. 14: $45.75 Monday: $2.875, down $1.75
Source: TradeLine
