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Well-funded display developer downscales

Candescent, once a lavishly funded start-up with plans to revolutionize the market for PC monitors, scraps its manufacturing aspirations and will cut its work force.

Candescent Technologies, once a lavishly funded start-up with plans to revolutionize the market for PC monitors and other displays, has scrapped its manufacturing aspirations and will cut its work force, the company has confirmed.

The San Jose, Calif.-based company, which received more than $600 million in funding from venture capital firms and corporate backers including Sony and Hewlett-Packard, has abandoned plans to manufacture screens based on field emission display (FED) technology, said Dawn Morse, the company's director of investor relations. Instead, Morse said Friday, Candescent will license its technology to other companies looking to manufacture thin, high-resolution screens based on the FED system.

The change will involve an unspecified number of layoffs, Morse said. "The focus is going to go to a licensing model, so we won't need the same level of staff," she said.

Candescent began operations in 1991 as one of a handful of companies hoping to capitalize on FED, an emerging technology touted for producing flat-panel screens with exceptional brightness and color depth. The company came close to manufacturing several times, going so far as to build a 340,000-square-foot plant in San Jose in the late 1990s. But continued challenges with FED technology and market conditions prevented it from ever creating a product.

Candescent filed for an initial public offering in February, planning to sell 150 million shares at an undetermined price. The company withdrew the IPO plan in May, citing market conditions.

David Mentley, senior vice president of Stanford Resources, a research firm specializing in display technology, said FED screens have turned out to be more expensive and more difficult to produce than many expected in the early 1990s.

"It's stuck in the laboratory, basically," he said. "A few runs at manufacturing just didn't take hold. Motorola had a big line set up, but it hasn't gone anywhere and there's basically been zero product sales."

Organic light-emitting diodes (OLEDs), another technology for creating thin, bright displays for devices ranging from PC monitors to digital camera screens, has shown more immediate promise, said Ross Young, president of research firm DisplaySearch.

"Definitely, OLEDs have more traction, and they're simpler to manufacture," he said.

Candescent had 366 employees as of February, according to regulatory documents filed in conjunction with the IPO plan. The company posted a net loss of $74.67 million for 1999, the latest period for which full-year figures were provided, and had $1.4 million in cash on hand as of Sept. 30, 2000.

Major backers of Candescent included HP, whose $25 million investment made it the biggest single shareholder in the company, with a 13.4 percent ownership stake, according to the regulatory filing. Sony owned a 5.4 percent stake and signed an extensive licensing agreement with Candescent set to expire at the end of this year. Morse said the companies were still negotiating renewal of the agreement.

The regulatory filing listed numerous risk factors, including intense competition from other companies and technologies. "Many developers of alternative and competing flat-panel display technologies have substantially greater name recognition and financial, technological, research and development, manufacturing, marketing and distribution resources than we do," according to the statement.

Young said FED technology still shows promise for some large-scale applications. "For large-size panels, like for hang-on-the-wall TVs, FED still seems to have potential," he said.

Added Mentley: "I wouldn't say FED is dead--there are some interesting variations being developed. But the near-term future for FED certainly does not look good."