LONDON ? Mobile-handset software developer Esmertec AG (Zurich, Switzerland) is blaming sharp price erosion in the embedded Java market for a projected revenue decline for the first six months of 2006. After the company announced it expects to post a loss for the half on more than a 50 percent drop in revenue from the year-ago period, its share price fell 56 percent on the Swiss exchange.
In the wake of the profit warning, chairman and CEO Alain Blancquart resigned late last week. COO Jean-Claude Martinez will fill the vacated posts on an interim basis.
At the same time, at the company?s first annual meeting, held Friday (May 19), shareholders approved a conditional increase in share capital so that Esmertec can grant stock options to board members and some employees. They also approved an increase in the authorized share capital to give the company?s board the flexibility ?to create shares at short notice for acquisitions or partnerships, if needed.?
The company said it expects revenue for the six months ending June 30 to be significantly below $10 million, compared with $20.1 million in the year-ago half. ?This development is due to a sharp price decline in the embedded Java business of the mobile-phone market, and on the management decision to focus more on shorter-term contracts, which reduce financial risk but result in lower revenue,? the company stated.
Esmertec said it expects to post a hefty loss for the half, even before possible impairment losses on intangible assets. Operating expenses are on target and are expected to be stable compared with the second half of 2005.
For the future, Esmertec will extend its operations beyond the embedded software market, as previously announced, thus reducing its dependency on a single market segment, board vice chairman Hans-Ulrich Mueller said. The business strategy will look to develop software solutions and services for mobile operators, mobile advertisers and game developers
Last year Esmertec postponed a planned initial public offering of shares. The company?s board of directors includes Ulrich Schumacher, former president and CEO of Infineon Technologies AG, as well as Michel Bon, a former chairman and CEO of France Telecom.