Bill Gates' $37-billion foundation is buying shares of Vitec Group, the British broadcast-equipment maker helping NBC cover the Beijing Olympics, as the century-old company transforms itself from a tripod vendor to a one-stop shop for TV studios.
Four of Vitec's six biggest shareholders reported buying in February and March filings. The Microsoft Corp. founder and wife Melinda's foundation added 122,200 shares for a 2.1% stake, according to a regulatory filing.
The shares, down 18% since October, are "significantly undervalued," said David Herro, who manages the $1-billion Oakmark International Small Cap Fund at Harris Associates in Chicago.
Nine acquisitions in three years expanded the Kingston upon Thames, England-based company's offerings to include wireless links for covering outdoor events and mini-studios that can be shipped by air. Sales growth may reach 10% a year even after a contract with Sprint Nextel Corp., the U.S. mobile-phone company, runs out in 2009, Chief Executive Gareth Rhys Williams said in an interview.
Harris Associates is Vitec's biggest investor with a 12.5% stake, according to regulatory filings, including the shares it bought on behalf of the Seattle-based Bill & Melinda Gates Foundation. "As broadcasters switch to high definition, it has meant growth for the ancillary products such as support and lighting," Herro said.
Vitec trades at 9.8 times estimated 2008 earnings per share, 42% cheaper than Ougree, Belgium-based EVS Broadcast Equipment, the largest supplier of disk recorders for live broadcasts.
Vitec's equipment includes robotic camera pedestals, wireless teleprompters and lighting. ITN News, a unit of ITV, Britain's largest commercial broadcaster, uses Vitec's robotic broadcast systems in its London studios, as well as the company's batteries to power outdoor broadcasts.
As broadcasters, including CNN and Fox News, switch to high-definition programming, they must upgrade to tripods that reduce vibration because picture quality is more sensitive to movements, Rhys Williams said.
"As folks replace their cameras, they replace all their studio gear too," Rhys Williams said. "That wave has quite a few years to go yet."
Vitec broadened its range of services with the $38.5-million acquisition of RF Systems in June. The unit's antennas, receivers and converters can transmit footage wirelessly from outdoor events to production centers. Vitec upgraded the NFL's instant replay systems at 29 U.S. stadiums last year and will provide wireless helicopter links for news crews at the Olympics.
RF is participating in Overland Park, Kan.-based Sprint Nextel's $600-million project to provide antennas that will help move to a frequency spectrum that doesn't interfere with police and fire radio signals.
Half of Vitec's revenue comes from North America and the dollar's 13% fall against the pound since the beginning of 2006 has eroded the value of U.S. sales.
"The falling dollar is a nightmare," Rhys Williams said. "There will come a time when the dollar starts appreciating again, in which case we will make a phenomenal amount of money."
To increase sales outside the U.S., Vitec plans to expand the RF unit in Asia, Europe and South America and may buy distribution partners in Mexico, Canada, South Korea, Russia and Spain, Rhys Williams said.
Founded in 1910 as a movie-camera maker, Vitec sells tripods and photography bags under brands such as Manfrotto and National Geographic.