As the battle for supremacy in the 3D graphics chip market continues to intensify, one of the key contenders, UK-based Videologic Group Plc which makes the PowerVR chip, has stumbled, and investor confidence is slipping away. At the half year stage, net losses widened to 2.9m pounds from 1.2m pounds last time while revenues fell by 26% to 5.4m pounds. The figures include an exceptional charge of 1.9m pounds for the restructuring of the direct marketing operation in the US, a market where Videologic has seen some depressing results. US sales fell by 66% and were the main reason behind the fall in group revenues. The shares are now sitting a long way from their 52 week high of 74 pence, falling 22% pence to 44 pence. Contributing to the downward pressure on the share price was the resignation of chief executive Tony Maclaren, who has been with the company since its inception thirteen years ago. Maclaren has had enough of the every day pressures in the business he founded, and although he will retain a 1% interest, he wants time out to climb a few mountains. Videologic is sanguine about the loss but it comes at a critical time for the company, with major rival 3Dfx Interactive Inc about to launch its next generation product which is widely expected to set a new standard for speed and functionality in the expanding PC graphics board market. 3Dfx is claiming a five-fold increase in speed, which would leave Videologic playing catch up once again. The UK company was initially slow to persuade software developers to write directly for its PowerVR chip, something which 3Dfx realized was crucial from the outset. But Videologic has recovered from a slow start and now claims a library of around 100 games which support its Apocalypse range of 3D graphics cards. 3Dfx markets its rival board under the Voodoo logo and these two companies are presently the only ones to be supported en masse by games developers. Videologic has also launched PowerVR direct, which is a web-based direct sales channel for PowerVR supported games. In terms of the games console market, Videologic has been developing its PowerVR technology for two years, and things could be on the verge of opening up. Sega Enterprises Ltd, which recently abandoned its partnership with 3Dfx is rumored to be on the verge of a deal with Videologic, although Sega deny this. Unfortunately for Videologic, it has been dragged into a legal mud slinging match, as 3Dfx has named it as a defendant in a $105m law suit which claims foul play on the Sega deal. The one unambiguous ray of sunshine for the UK outfit is the continued support from the giant Japanese chip maker NEC Corp with whom Videologic has formed a long term fabrication partnership. NEC has purchased a further 1.5% stake, taking its total interest to 3.5%.
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