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Diamond posts disappointing Q2 figures

So is the S3 merger off or on, then?

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Diamond Multimedia yesterday posted disappointing Q2 results, but at least the figures suggest S3's acquisition of the company should go ahead as planned. Diamond reported revenues for the quarter, ended 30 June, of $128.7 million, down 34 per cent on the $172.3 million posted for the same period last year. But while revenue fell, the company's loss improved -- this time it lost $5.4 million; last year it lost $8.3 million. That implies that the company's plan to improve its business -- primarily by moving away from low-margin products like low-end 3D graphics cards and modems, and toward more profitable areas like digital music and home networking -- is beginning to take effect. The final income figure Diamond posted was actually $10.8 million, thanks to a charges incurred in the process of converting its RioPort division into an independently operating business. RioPort, which focuses on the MP3 digital music market, will be spun off during the current quarter. Curiously, Diamond made no reference to its upcoming purchase by 3D graphics specialist S3, which last month launched a $180 million buyout bid for Diamond. Rumours had emerged that the deal may be off, suggesting it may well have been simply a way for S3 to avoid being aggressively acquired by rival graphics company 3dfx. Equally, the success of the RioPort division might well suggest that S3's bid undervalue Diamond. The current results, however, suggest at least that if S3 is still interested, the deal should proceed. Apart from the anti-3dfx angle, the move is still a sensible one for S3 as it struggles not only to regain its former glory but to compete in a market that's forcing technology developers and hardware manufacturers to come together, as 3dfx and STB Microelectronics did. ®

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