Pace leaps back into the black

Pace Micro Technology has clawed its way back into the black helped by growing demand for the new breed of digital video recorders (DVRs).

Yorkshire-based Pace is Europe’s largest producer of digital set-top boxes and a major developer of DVRs, the hard drive-based video technology tipped as thelogical successor to the VCR.

DVRs allow viewers to record and store large volumes of programming and to ‘pause’ live television and watch it later.

Pace is a major technology supplier to BskyB, which has been engaged in a big marketing push for Sky Plus, its own DVR service.

Pace said it had seen a ‘marked increase’ in demand for Sky Plus boxes towards the end of last year. The electronics firm added that its cable television customers were also beginning to focus on DVR technology.

The extra Sky Plus demand was one of the factors behind a reversal of fortunes for Pace, which returned to profit after what its chairman Michael Bett described as ‘a difficult couple of years’.

The company made £1.1m in the six months to November compared to a £16m loss at the same stage in 1992. Sales were 32 per cent ahead at £110m.

Pace had endured a miserable 2002 following the flop of pay-TV venture ITV Digital, a major customer for its boxes, and a slowdown in the growth of cable television in the UK. Sales in the US also failed to meet the company’s expectations.

The company has since implemented a cost-cutting programme, but said its engineering base had been left unscathed.

Alongside the increased DVR business, Pace was helped by growing demand for its products in several European and Asian markets.

Sky Italia has suddenly emerged as one of Pace’s biggest customers. The company has also made inroads into the German cable TV market, and testing of its boxes is underway in Australia.

The upturn in export demand is crucial for Pace, which has traditionally been heavily reliant on the domestic UK market.

Despite the increasing success of Sky Plus, the UK is unlikely to repeat the explosive growth of the late 1990s, when cable TV companies bought huge numbers of boxes to underpin their own rapid expansion.

Pace was once of the first electronics companies to produce a low-cost set-top box for the Freeview digital TV service. However, competition in the market is intense and profit margins smaller than those available from more technologically sophisticated products such as DVRs.

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