Parthus Technologies, the Irish chip-design firm, reported strong revenue growth yesterday and said it was on track to make a profit in the second half of 2002 despite a poor industry outlook.

The company, which plans to merge with the design licensing unit of US-Israeli technology firm DSP Group later this year, made a pro-forma first-quarter net loss for this year of $2.4 million (€2.7 million), compared with a $3 million loss in the fourth quarter of 2001.

In the first three months of 2002, Parthus generated licensing and royalty revenue of $8.9 million, a 53 per cent increase year-on-year.

Mr Kevin Fielding, president of Parthus, said the strong royalty growth was based on just three products. The firm has done 50 such deals, including one with Microsoft for the Xbox games console, with revenue expected to grow over the next few quarters.

Licensing fees are a one-off payment to use a design, whereas royalty income is the money the firm gets from companies every time it sells a product running on a Parthus-designed chip.

And while a sustained pick-up in the semiconductor industry is not expected until the end of 2002, Parthus chief financial officer, Ms Elaine Coughlan, said growth in licensing and royalty revenues would push it into the black.

"The expectation is to break even in the third quarter and to have a small operating profit in the fourth quarter and by that we mean in a couple of per cent range," Ms Coughlan said yesterday. For the full-year 2003, Ms Coughlan said Parthus expected operating margins of around 5 per cent, which would increase to 25 per cent for the merged group.

Total revenue rose year-on-year to $10.7 million from $9.8 million in the first quarter of 2001, in line with expectations, and Parthus completed six new licensing agreements in the first three months of the year. - (Additional reporting Reuters)