S3 Inc, the Santa Clara, California-based maker of multimedia accelerators has been forced to start cutting its overheads in the face of poor demand for its products, starting with a 20% workforce reduction. S3 reported second quarter net losses of $11.6m last week, against a $1.8m loss last time, and revenues fell 37% to $53m. The company blamed a severe decline in Asian demand and a collapse in revenues from the company’s older 2D and 3D products. S3 dramatically reduced its inventory levels and chopped accounts receivable by more than half from the preceding quarter, helping the company to push up its cash holdings to $152m at the end of June. And CEO Terry Holdt said S3 would continue to plough its cash into product research, with R&D expenses running parallel to the prior period at $40m for the first half, or 30% of revenues. Holdt also said S3 had achieved a design win for its Savage3D accelerator with Diamond Multimedia Inc, a fast growing player in the graphics board market, and maker of the successful Monster 3D II graphics card. But S3’s stock still fell 10% following the news, and the shares are trading at a quarter of their year ago value.
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