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Solomon Smith Barney downgrades Zoran to Neutral

Cuts semiconductors company's earnings forecast for 2001 from $1.1 to 70 cents

Investment house Solomon Smith Barney hastily cut estimates for

Zoran Corporation

(Nasdaq:ZRAN) following disappointing financial figures released by the company on Friday.

SSB downgraded the stock from Buy to High Risk Neutral, though it retained the price target at $22 a share. Analyst Victor Halpert cut 2001 income estimates from $130 million to $120 million. Earnings estimates were reduced from $1.1 a share to 73 cents.

Halpert writes that Zoran's chip sales to the DVD segment increased by only 30% in 2000, while the DVD industry grew by 100%. One problem may be that key buyer

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saw its market share contract. Also, Halpert writes, Toshiba may be buying DVD chips from other suppliers for some products. The analyst worries that Zoran will find it hard to compete with CUBE and its ilk in the DVD-encoding arena. Moreover, as consumer spending slows in the United States, sales of DVD and digital cameras are likely to suffer.

The company also had trouble in the digital camera segment, where its achievements were apparently hampered by a production delay.

Among the brighter factors, Halpert notes the company's "commanding market presence" in China, where it is estimated to hold over 40% of the market. He assesses that the company will soon announce several significant contracts with key customers in Europe and Asia. He expects those deals to contribute significantly to company's 2001 income.

Zoran designs and fabricates compression and decoding technology for the voice and video data market. Its main focus is DVD, which accounts for 55% of its income. Zoran is also active in the digital camera market and in video-editing.

Shares of Zoran dropped 18.9% to $18.4 on Friday after gaining 43% on the previous six trading days. the stock's 52*week high was November 2000, when it hit $50 a share.