Pace issues fourth profit warning in nine months

Pace Micro Technology yesterday issued its fourth profit warning in only nine months after admitting that shipments of advanced set-top boxes to the key US market will be delayed until the latter part of 2006.

Pace Micro shares crashed 13 per cent to 47p on the back of the latest disappointment, capping a disastrous year for one of Europe's largest set-top box manufacturers. The group signed an agreement with the US satellite broadcaster DIRECTV last July, a deal that initially won huge applause among investors. However, delays in supplying the equipment have undermined that sentiment.

Pace said in March that it expected to begin shipping to the US by June, but the delays in development mean shipments will not start until the second half of this year. Because those shipments will not begin until Pace's next financial year, the company revised its profit forecast for the year to 3 June once again. Pace said it expected to report a loss before tax of £15m on revenues of £180m, well below market expectations and its previous guidance. Pace also said that due to the development delays, its ability to forecast what progress will be made in fiscal 2007 has been impaired. It warned that it could reassess the value of its assets at its full-year results.

A Pace spokeswoman said the company was making progress but declined to detail whether the product delays related to high-definition television technology.

BSkyB, the UK satellite broadcaster, warned a week ago that up to 17,000 UK users who have ordered high-definition television packages may not receive the technology in time for the start of the World Cup. The delay was a result of BSkyB's set-top box supplier Thompson failing to deliver enough hardware.

Ian Robertson, an analyst at Altium Securities, said that more worrying than the financial impact is the damageto Pace Micro's reputation. He said that after signing its US contract a year ago, the company has "taken its eye off the ball". Mr Robertson said: "Once a customer has gone, they don't come back."