PortalPlayer CEO on Windows Vista's No-boot Display and Functionality (PLAY, MSFT)

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Fabless semiconductor firm PortalPlayer (NASDAQ:PLAY) provides the chip that powers Apple’s iPods and other portable media devices. PortalPlayer reported very strong 4Q05 earnings late last week, easily outpacing analysts' estimates. PLAY jumped about 10% on Friday on the news. The key numbers:

EPS: $0.92 cents per share ($0.62 excluding items) -- beat analyst estimates of $0.48
Revenue: $78.2 million, up 75% y/y -- beat analyst estimates of $73.7 million.
Guidance for 1Q06 EPS: $0.35-$0.45 before stock option expenses (analysts expect $0.36)
Guidance for 1Q06 revenue: $70 million -- $80 million (analysts expect $63.6 million)

In the conference call, PortalPlay CEO Gary Johnson discussed a new product division devoted to powering 'secondary displays ' for notebook computers running the forthcoming Windows Vista:

Now let’s talk about our personal media display division. This new product division leverages our current leadership in the personal media player market into other markets that can benefit from low power multimedia displays. The first new market addressed by this division is the secondary displays for notebook computers. These displays, an anticipated new feature in notebooks, will be located on the outsides of the lid of the notebook, and allow the consumers to access key data, application, music, photos, and video content without having to turn on and boot up the notebook. In order to enable the best customer experience for this new feature, it should be tightly integrated with the operating system and applications on the notebook.

With this in mind the personal media display division has been working very closely with Microsoft, to enable this capability in Microsoft’s slide show technology, which is part of the Microsoft Vista operating system. We recently launched our solutions to in market under the name Preface. In a book, the preface is the first thing you read and from this case the Preface-enabled display is the first thing you will look at on your notebook. In addition to eliminating the need to boot the computer to access the notebook content, a process that can take between two and four minutes, the low-powered nature of the Preface technology platform can enable up to 500 hours of music playback on the notebook. The low powered capabilities of the Preface platform also enabled access to certain notebook content for tens of hours, even if the battery is depleted to the point where the notebook can no longer boot up.

Initially notebooks that incorporate this technology will have access to data such as music, picture slide shows, Outlook calendar, e-mail, contact information, alarms, clocks, battery meters, and so forth. In addition, Microsoft is making this an open platform so third-party developers will be able to write their own applications, known as gadgets, allowing users access to many kinds of data stored on the notebook. In addition to Microsoft, we have also been working with partners such as Altura, Authentec, and Symantec to offer a variety of interfaces for these personal media displays.

According to Gartner, notebooks are the fastest growing segment in the PC market and we believe that manufacturers are looking for ways to differentiate their products. The PortalPlayer Preface technology enables visible differentiation to the design and the use of notebooks, which really have not changed since they were first introduced in the 1990s. We expect notebooks and secondary displays using Windows Vista to begin shipping in the second half of 2006. This year, we believe that total available market for this technology could be as high as 6 million units, growing to 16 million units next year and about 48 million units or almost half of the entire notebook market by 2008. Our targeted customers to Preface will be the top 10 OEM and ODM notebook manufacturers. In fact at CES we showed prototype designs from Quanta, and Asustec, which together make up a substantial portion of entire notebook market.

PLAY 1-yr chart: