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Carlton Communications, the world's largest video manufacturer, agreed to buy compact disc maker Nimbus CD International for about $264m in cash to become the leading producer of digital video discs.

Nimbus, which is second to Time Warner's Warner Brothers in digital video disc sales, strengthens Carlton unit Technicolor's place as the leading maker and seller of movie video cassettes and the newer digital video discs for Hollywood studios. Nimbus, which also makes audio compact discs, CD-Roms and DVD-Roms, expands Technicolor's position in North America, Europe and the UK

"It fits in very nicely with Technicolor, providing them with more capacity in a new medium," said Louise Barton, an analyst at Henderson Crosthwaite Institutional Brokers. "They're winding down the VCR and starting with a new medium."

"Just as the company added video cassettes to its film operations in the Eighties, now we are adding optical discs in the Nineties," Carlton chairman Michael Green said.

"The penetration of VCRs, DVD players and PC disk drives are all growing as part of the worldwide expansion of screen-based entertainment."

Digital video discs are compact discs that can store an entire movie. About 200,000 DVD players were sold in the first year after their US introduction in 1997, compared with about 19 million video cassette recorders. VCRs took two years to see similar sales when they were introduced in 1975.

DVD players sell for about twice as much as VCRs in the US, while digital video discs sell for about $20 apiece, compared with $15 for a video cassette.

Nimbus also makes and sells DVD-Roms, which are expected to become standard in all personal computers, and sales are forecast to exceed 2 billion in the US and Europe by 2003.

Copyright: IOS & Bloomberg