CIBC Oppenheimer is not changing its forcasts for


(Nasdaq:INDG, INDGW) even though the company failed to meet earnings forecasts for the first quarter and also slipped into the red.

CIBC Oppenheimer analysts Miri Meir and Avivit Mannet-Kalil also reiterated their Hold recommendation for Indigo, and gave it a 12-month price target of $4.75 for the coming year. But with the current share price at $5, the recommendation could be interpreted as a Sell.

Indigo reported revenues of $42.6 million in the first quarter, 18% growth compared to last year's Q1. Printer revenues rose by 20% over last year's parallel quarter and reached $24.1 million. Analysts claim that the revenue increase came from distributors, mainly in Latin America, and not from direct revenues.

Predicted increase in revenue from accessory products

The company's revenues derived from accessory product sales including components and services amounted to $18.5 million in the first quarter. Its gross profit margins from these sales came to 54%, which is slightly lower than in the fourth quarter of 2000. This decrease is attributed to price erosion, the negative influence of currency differences, and relatively low sales in the Asia- Pacific region.

This drop offset Indigo's reported 20% increase in the total number of printed pages produced by its printing machines. But Oppenheimer believes that revenues from accessory sales will continue to grow, due to the continued rise in the number of machines installed, and the increase in the number of pages printed on each machine.

CIBC Oppenheimer estimates that Indigo will announce an annual growth of 22% for this year, with revenues of $200.7 million.

The analysts believe that company's agreement with

Hewlett Packard

(NYSE:HWP) will starting showing profits in 2002, and say this will positively influence Indigo's revenues. The company's printer-based revenues are expected to rise by 25%, and its revenues from accessory sales to increase by 40% - reaching an overall sum of $263.4 million.

Analysts believe that Indigo's marketing costs will come to 39% of the firm's revenues in 2001, and will continue to be the main burden on its annual profit and loss report.

CIBS Oppenheimer estimates that Indigo will only achieve profitability in the fourth quarter of 2001, and its annual loss will be one cent per share. The firm is expected to show an improvement in 2002, and announce a 19 cent per share profit.

Analysts have devoted a few words to Indigo's rival, Xeikon, stating that Indigo is continually bettering its position in the digital color printer market, which emphasizes Xeikon's weaknesses. Another Indigo strong point compared to Xeikon is its cash flow: Indigo presently has $84 million in cash reserves, compared to Xeikon's $1.5 million. Whereas Indigo showed a growth of 18.5% over the parallel quarter, Xeikon showed a 22% loss.