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DG FastChannel Inc. Reports Operating Results (10-K)

March 01, 2011 | About:
10qk

10qk

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DG FastChannel Inc. (DGIT) filed Annual Report for the period ended 2010-12-31.

Dg Fastchannel Inc. has a market cap of $935 million; its shares were traded at around $33.11 with a P/E ratio of 19.4 and P/S ratio of 3.8. Dg Fastchannel Inc. had an annual average earning growth of 0.8% over the past 10 years.Hedge Fund Gurus that owns DGIT: Joel Greenblatt of Gotham Capital, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns DGIT: Mario Gabelli of GAMCO Investors.

Highlight of Business Operations:

On May 31, 2006, we completed a tax-free merger transaction with privately-held FastChannel Network, Inc. ("FastChannel") whereby FastChannel became a wholly-owned subsidiary of ours. The $28.8 million purchase price consisted of 5.2 million shares of our common stock valued at $27.4 million and $1.4 million of transaction costs. Similar to us, FastChannel operated a digital distribution network serving the advertising and broadcast industries. The merger with FastChannel expanded our electronic network, increased our customer base, and resulted in operating synergies. On June 4, 2007, we acquired privately-held Pathfire, Inc. ("Pathfire") for $29.7 million in cash. Pathfire distributes third-party long-form content, such as news and syndicated programming, through a proprietary server-based network via satellite and Internet channels. The acquisition increased our customer base and resulted in operating synergies. In December 2006 and early 2007, we acquired an approximate 16% interest in Point.360. On August 13, 2007, we completed the purchase of all of the issued and outstanding shares of common stock of Point.360 that we did not already own (approximately 84%) in exchange for 2.0 million shares of our common stock. In the aggregate, the total purchase price was valued at $49.7 million. The acquisition increased our customer base and resulted in operating synergies. Immediately prior to the exchange, Point.360 spun off its post-production operations to its 4

On August 31, 2007, we acquired substantially all the assets of privately-held GTN, Inc. ("GTN") for $11.5 million in cash (including transaction costs). GTN provided media services in Detroit, Michigan and was focused on the automotive advertising market. GTN also had post production operations that we sold immediately following the closing of the acquisition for $3.0 million in cash. The acquisition increased our customer base and resulted in operating synergies. On June 5, 2008, we completed the acquisition of substantially all the assets and certain liabilities of the Vyvx advertising services business ("Vyvx"), including its distribution, post-production and related operations, from Level 3 Communications, Inc. ("Level 3") for approximately $135.4 million in cash (including transaction costs). Vyvx operated an advertising services and distribution business similar to our video and audio content distribution business. The purpose of the acquisition was to expand our customer base and operations, and resulted in operating synergies. In May 2007 we acquired 10.8 million shares, or 13% of the then outstanding shares, of Enliven Marketing Technologies Corporation's ("Enliven") common stock. On October 2, 2008, we completed a merger with Enliven. Pursuant to the merger agreement, as amended, we exchanged 0.033 of a share of our common stock for each of the approximately 88 million shares of Enliven common stock outstanding and not previously held by us. In the aggregate, we issued approximately 2.9 million shares of our common stock in the exchange. In total, including shares of Enliven previously held, the purchase price was $74.6 million. The purpose of the acquisition was to expand our customer base and service offerings. On October 1, 2010, we acquired the assets and operations of privately-held Match Point Media LLC and its divisions, Treehouse Media Services, Inc. and Voltage Video, Inc. (collectively referred to as "Match Point"), a market leader in the customization and distribution of direct response advertising, for $27.7 million in cash, which includes $1.0 million paid into escrow related to a potential earnout obligation. Depending on Match Point's future revenues, we may be required to pay up to $3.0 million under the earnout obligation. Match Point provides media advertising services to advertising agencies and advertisers participating in the direct response advertising industry and is part of our video and audio content distribution segment. We acquired Match Point to expand our customer base and product offerings. The acquisition also gives us an opportunity to bring digital distribution and digital workflow solutions to the direct response marketplace which will likely result in operating synergies. Available Information

grow from $61.8 billion in 2010 to $91.5 billion in 2013, representing a compound annual growth rate of 13.9%. eMarketer predicts online advertising expenditures in the United States are to grow from $22.7 billion in 2009 to $40.5 billion in 2014, representing a compound annual growth rate of 12.3%.

According to eMarketer, online video and rich media advertising continue their year over year growth. Online video advertising is expected to be the fastest growing advertising format in the United States and spending is projected to increase from $1.0 billion in 2009 to over $5.5 billion in 2014, representing a compound annual growth rate of 40.3%. Emerging media formats and channels, such as mobile devices, game consoles and on-demand television, provide significant opportunities for advertisers to expand audience reach and strengthen their relationship with their target audience in innovative ways. Rich media advertising in the United States is expected to grow from $1.5 billion in 2009 to $1.8 billion in 2014 yielding a compound annual growth rate of 3.7%.

Through our suite of innovative services, we seek to address the needs of advertisers at various stages along the value chain of advertisement creation and delivery. These include idea generation, production and duplication, content distribution, media asset management and broadcast verification products. By offering services that encompass multiple stages of content creation and delivery, we are able to simplify the workflow process for advertisers. We believe our solutions offer advertisers tools essential to the creation and strategic distribution of advertisements in a cost-effective manner. We continually upgrade our systems to meet our customers' needs. During the years ended December 31, 2010, 2009 and 2008 we spent $10.6 million, $6.3 million and $4.3 million, respectively, on research and development activities, none of which were sponsored by customers. Our services address our clients' needs for efficient, accurate and reliable solutions for the development and delivery of advertising content across a wide spectrum of media, and include the following offerings:

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