S3 sees upside surprise in 2Q, bullish on fiscal year

S3 Inc. (Nasdaq: SIII) said Thursday it expects to beat Wall Street's second quarter estimates and may break even.

S3, fresh off its acquisition of Diamond Multimedia Inc. (Nasdaq: DIMD), said it expects its results to be between break even and a loss of 5 cents a share.

First Call consensus for S3 calls for a loss of 20 cents a share for the quarter. For the year, S3 is expected to lose 39 cents a share.

Based on preliminary results, S3 said sales will top $50 million. The company reports second quarter earnings July 15.

In a statement, Ken Potashner, CEO of S3, said the second quarter performance puts the company ahead of its plan to turn a profit by the end of the year. "While profitability depends on the financial effects of the Diamond acquisition amongst other things, we look forward the challenges and opportunities ahead of us," said Potashner in the release.

S3 was also bullish on its revenue prospects. "We believe the company has the potential to approach a billion dollars in revenue in the next fiscal year, assuming the completion of the Diamond acquisition and depending on our combined execution and financial performance," said Potashner.

In the quarter, S3 announced design wins with Compaq, IBM, Packard Bell NEC and a patent license agreement with UMC.