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PortalPlayer vows to regain iPod biz

Posted: 04 May 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Dylan McGrath? Mark LaPedus? PortalPlayer? Samsung? iPod?

PortalPlayer Inc. posted a GAAP net income of $6.5 million on a dramatic 62 percent increase in year-to-year revenue during Q1. But the company's stock took another beating after it issued guidance that said Q2 revenue could be less than half what analysts were expecting.

PortalPlayer posted Q1 revenue of $72.3 million, up from $44.5 million for the same period of 2005, but down sequentially about 7 percent from Q4 2005 revenue of $78.2 million. The $6.5 million GAAP net income, which equates to 26 cents per share, was down 17 percent from the $7.8 million for Q1 of 2005 and sequentially down a whopping 73 percent from the $23.8 million posted for Q4 of 2005.

In a statement, PortalPlayer president and CEO, Gary Johnson, said the company completed a strong Q1 but was disappointed by the news that its new media processor was not selected by Apple Computer Inc. for use in midrange and high-end flash-based iPod music players. An executive from Samsung Semiconductor Inc. has said that Samsung won that socket.

"Notwithstanding [the Apple setback], we believe the pace of innovation behind our new technologies is accelerating," Johnson said.

Since the Apple announcement, PortalPlayer has seen its stock price drop by 59 percent. The stock closed at $11.51 in Nasdaq trading prior to the earnings announcement. The stock traded lower in after hours trading following the announcement, slipping below $10.75.

PortalPlayer said it currently expects revenue for Q2 to be in the range of $30 million to $40 million. The company also expects to report anywhere from a loss of 3 cents per share to an income of 5 cents per share for the quarter. Consensus analyst estimates had called for revenue of $61 million for Q22.

"The market segments we are targeting are expected to see significant long-term growth and we have made substantial investments in developing technologies to enable highly integrated, feature-rich products to pursue them," Johnson said.

Fighting back
Meanwhile, during a conference call with analysts after releasing the results, Johnson vowed that PortalPlayer would "fight" to regain the lost iPod chip business at Apple. As reported, Samsung won the next-generation, iPod nano chip business, but the next-generation video iPod socket is said to be up for grabs. Broadcom, PortalPlayer and Samsung are said to be competing for the next-generation, video iPod socket.

"We haven't given up with that customer," Johnson told analysts, referring to Apple. "We will fight back to win that socket."

The PortalPlayer executive declined to comment on the reasons for losing the iPod nano chip business at Apple. "We believe our customer's decision was very complex," he said. It "covers a whole plethora of items."

PortalPlayer, which realizes more than 95 percent of its sales from Apple, is scrambling to diversify its product line. The company is developing a chip for the notebook PC market, but the company is not expected to realize sales for that product line until the fourth quarteror one quarter later than expected.

- Dylan McGrath, Mark LaPedus
EE Times

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