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Why Digital Lava Could Erupt

Inside Wall Street

Why Digital Lava Could Erupt

Not every Internet company that goes public blasts off. Digital Lava (DGV), initially offered at 7 1/2 a share on Feb. 17, headed south and now trades at 5 1/16. Blame it on lack of hype or a technology that investors may have found difficult to comprehend. But some bulls aren't worried. They think alliances and contracts for Digital's video-publishing software will fire up the stock.

"Digital is a very undervalued play on the future of video applications on computer networks," says Brian Hathaway of Hathaway Investment Advisers, which owns more than 230,000 shares. Digital develops software for creating videos used for training, research, and Net marketing.

With Digital's flagship product, vPrism, creators of videotape can develop programs for interactive multimedia applications for desktop computers. Digital's VideoVisor lets users edit and manipulate video linked with other types of information, allowing integration of digital video and audio content with other types of info typically stored on the Internet or intranet.

Digital's partners include Microsoft, RealNetworks, and Silicon Graphics. Digital is a vendor for NetShow, Microsoft's software for viewing streaming media over the Internet or intranet. Digital also licenses Microsoft's Internet Explorer kit. Microsoft's lead product manager, Gary Schare, says Windows' media technologies, combined with Digital's video publishing, "provides our customers with powerful solutions suited for communication and learning-on-demand applications."

Digital CEO Joshua Sharfman sees the company's ties with Microsoft just "scratching the surface." One money manager speculates that Microsoft may incorporate Digital's video software in its suite of products.

Ray Dirks, director of research at Security Trading Capital, expects the company to turn a profit next year and earn 72 cents a share on estimated revenues of $18.7 million, vs. an estimated 1999 loss of 78 cents a share, on sales of $4.1 million.BY GENE G. MARCIALReturn to top

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