Parthus receives cautious second quarter reaction

Shares in Parthus Technologies rose sharply and then fell back just as quickly in London yesterday, illustrating a cautious reaction to the Dublin-based chip designer's second-quarter results.

Parthus posted a broadly positive set of figures, with revenue rising to $10.2 million (#11.67 million) in the course of the second quarter, a jump of 30 per cent on a year-on-year basis.

Licences - deals involving one-off payments for Parthus software or chips - were the biggest contributor to this revenue, making up 70 per cent of the total in the second quarter, compared to 60 per cent in the first three months of the year. In the second quarter the company also signed 10 new licence deals, at least four with new customers.

Parthus now counts 3Com, Sharp and STMicroelectronics among its licensees, with the STMicroelectronics deal involving the licensing of six of the chip designer's platforms. This arrangement, likely to be jointly marketed by the companies, should lead to the generation of substantial royalties - payments made each time a product containing Parthus software is sold - for Parthus in the future.

Licences and royalties are crucial to the business plan of companies such as Parthus, which operate at the high-end of the semiconductor industry by designing rather than manufacturing. It is this emphasis on design which has, according to analysts, largely insulated Parthus from the downturn in the semiconductor industry.

So far, royalties form a tiny percentage of its revenue stream but in the long term, it is from this source that profits could be expected to emanate. Royalties typically begin to flow between 18 months and two years after a licence deal is signed.

Parthus chief executive Mr Brian Long said yesterday that he remained confident in his expectation that the company would break even in 2002 and realise profits "thereafter", despite the continuing semiconductor downturn.

For the time being, the company is reducing net losses, posting $5.06 million (#5.79 million) for the second quarter of this year, down from $7.9 million for the same period in 2000. Mr Long acknowledged that the whole industry was "in a tighter position" but said that since Parthus was not limited to designing chips for any one product, it was never completely exposed to negativity in any one area.

Underlining his optimism, Mr Long hinted yesterday that Parthus was looking for potential acquisition targets. He said that Parthus was in discussion with a number of companies. Shares in Parthus closed at 53 1/2 down 2p in London last night.