Having sunk 3.5m pounds of new cash into a manufacturing facility for recordable Compact Disks (CD-R), Plasmon Plc the Melbourne, Cambridgeshire-based optical storage group has been forced to shut down production after being pushed out of the CD-R market by a dramatic tumble in the price of disks. Excess capacity from south east Asia has flooded the market, according to Plasmon, and the average price of a recordable CD has fallen from $5.5 to just $1.0 in as little as six months. The price has fallen so far and so fast that Plasmon can no longer cover the cost of making its disks, forcing the company to withdraw from CD-R production completely, at an estimated cost of 6m pounds. The move will involve significant job losses the company said. The collapse in CD-R prices has taken Plasmon completely by surprise. The company floated in July 1996 to raise money for increased production in its UK optical disk manufacturing facility. Of the 7m pounds raised by the float, half was poured into CD-R facilities. As recently as November last year, the company was still gearing up to increase CD-R capacity, with a second production line being built to supplement the original development facility. In a statement accompanying the March 1997 year end results, Plasmon stated that it had ordered four further production lines, bringing the potential investment to a total of 12m pounds. And then things took a turn for the worse. A profits warning was issued on July 16th after it became clear that the market price for CD-R was collapsing, but the further decline in prices over the last six weeks prompted Plasmon to take drastic action. The decision was made to pull out of the CD-R market completely and founder and chief executive Peter Helfet, who brought the company to the market last year, has paid the price for Plasmon’s lack of foresight. He has resigned to pursue other interests. Into his shoes steps Nigel Street, formerly the commercial director, with Dr Chris Harris has being appointed as managing director of the media division. We caught a cold on CD- R admitted Street, but he insisted that this in no way impacted upon the group’s other, more profitable activities including manufacture of optical libraries and the development of new technologies such as DVD.
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