iPod chipmaker offers rosy outlook

PortalPlayer forecasts that its sales could rise to between $50 million and $60 million for the quarter that runs through September.

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
2 min read
PortalPlayer, whose chip powers the iPod, offered a bullish forecast on Monday, suggesting music player sales could remain strong for the second half of the year.

The San Jose, Calif.-based company forecast that its sales could rise to between $50 million and $60 million for the quarter that runs through September. That's greater than some analysts had been forecasting.

"We are excited about the momentum that is building for the second half for both existing and new customers," CEO Gary Johnson said during a conference call with investors.

For the past quarter, which ended June 30, PortalPlayer reported it earned $6.3 million, or 25 cents per share, on revenue of $44.6 million. The company had a loss of $880,000, or 64 cents per share, in the same quarter a year ago.

However, PortalPlayer shares dropped more than 1 percent in after-hours trading, changing hands at $26.30, down 35 cents from the close of regular trading. Ahead of its earnings report, PortalPlayer had ended regular trading at $26.65, a drop of 41 cents, or 1.5 percent.

The company's sales were basically flat from the prior quarter, in line with what the company predicted in April. However, PortalPlayer said it saw more of its sales go to its largest customer, widely known to be Apple Computer, while sales to other makers were weaker, perhaps a sign that other companies were more affected by a seasonal slowdown.

The company said it expects flash memory-based music players to account for a "significant" portion of revenue next quarter, and executives later said means more than 10 percent. The company would not say how many customers were using its chips for flash memory-based devices. Historically, the company has gotten its revenue from chips that go into hard drive-based players.

Johnson said recent drops in flash memory prices mean that the high end of the flash memory-based player market may grow faster than previously thought. Longer-term, Johnson said the company also sees a need for it to adopt more wireless capabilities into its products as network connected devices and music-playing cell phones become more common.

PortalPlayer's chief also pointed out that portable players now pack hard drives about the same capacity as many digital video recorders, potentially making them well suited to carrying movies, TV shows and music videos. Asked about the company's video abilities, Johnson noted that the current generation of chips is capable of playing video, either on its own, or in conjunction with a separate chip that is optimized for video playback.

Historically, PortalPlayer's product plans have provided hints about where the iPod could be headed.