VideoLogic Group Plc, the UK-based graphics chip designer, has finally produced a net profit of 1.8m pounds ($2.8m) for the year through March 31 up from a loss of 2.2m pounds ($3.5m) on revenue down 4% at 11.5m pounds ($18.4m). The company says there are two reasons for the return to profit. First, royalties from the chips that Videologic’s partner, NEC, is supplying for Sega’s Dreamcast console are starting to flow through. Second is a change in direction to a royalty-based model which has cut costs dramatically from 5.5m pounds ($8.8m) to 2m pounds ($3.2m). The company also plans to change the company’s name to Imagination Technologies Group Plc.
Dreamcast will undoubtedly boost revenue in the year ahead, though the long-term prospects of the console in an extremely competitive market are doubtful and VideoLogic says it needs to gets its chip designs in a broader range of products and talks about prospects in PC boards and set-top boxes through its recent alliance with STMicroelectronics NV, the Franco-Italian semiconductor manufacturer (CI No 3,637). Further ahead, it has begun R&D in emerging markets such as home networking and advanced visual interfaces. The results disappointed the market and VideoLogic shares fell 6% to 66 pence, down from the year’s high of 80 pence.
