Bad debts rise at Esmertec -

Bad debts rise at Esmertec

LONDON — Esmertec (Zurich, Switzerland) has released its financial results for the year ended December 31, 2005. Total group revenues for the year were $39.2 million, a 46.3% increase over 2004. License revenues increased by 48.6% to $29.7 million in 2005 and service revenues increased by 39.5% to $9.5 million. Only one customer, a top-tier handset manufacturer, represented more than 10% of revenues with 19.3%.

Operating loss was $13.8 million in 2005 compared to an operating loss of $5.4 million in 2004. Total net loss was $16.9 million for the year ended December 31, 2005 compared to a total net loss of $8.9 million in 2004.

In 2005, Esmertec acquired the mobile division of Coretek Systems, Inc. in China and grew its staff strength from 162 to 306 employees. In September 2005, the company completed its initial public offering on the main board of the SWX Swiss Exchange. Gross margin for the year was 62.2%, an improvement over the 55.5% gross margin realized in 2004. The net increase in the provision for bad debts was $7.7 million in 2005 compared to $497,000 in 2004. The increase in the provision for bad debts reflects Esmertec management’s judgment of the risk of recoverability of amounts owed by certain Asian and European customers. Esmertec is pursuing all avenues for settlements of the amounts due, including possible legal action in some cases. Consolidated revenues, including those from the new Mobile Operator Division, are targeted to grow at least 50% in 2006, with revenues in the first half expected to grow about 25% compared to the first half of 2005. The company's management expects to post a positive net result for the year 2006.

Alain Blancquart, Chairman of the Board and CEO, said, “In 2006, Esmertec will strategically work towards maintaining our leadership in delivering world-class software solutions to the mobile phone industry, and expanding our testing and porting services with current expertise. We will also focus on extending our market reach in the interactive multimedia segment and in developing our business for the Mobile Operator division with Cellicium.” Over 155 device models incorporating Esmertec software have been introduced to date.

Since the end of the financial year Esmetec made a strategic investment in Javaground (Irvine, California) and taken control of Korean software developer, ESLab.

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