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PortalPlayer Making a Comeback

By Anders Bylund – Updated Nov 15, 2016 at 6:03PM

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After losing its best customer, a small chip designer is regrouping into other areas.

It hurts when a friend stabs you in the back. PortalPlayer (NASDAQ:PLAY) had planned to lean on revenues from Apple (NASDAQ:AAPL) for the rest of the year, since it had designed a chip just to power the next-generation video iPod. As much as 95% of PortalPlayer's sales would have rested on that product alone by the end of the year. However, for various reasons, Apple turned elsewhere for the chips.

But PortalPlayer seems to have pulled the knife out, and it's doing its best to find new friends. In its latest earnings report, the company said that it's finding great support for its Preface personal media display platform. Preface is a small screen mounted on the outside of a closed notebook computer, giving users quick access to certain information and media-player controls without firing up the main screen. It's about convenience and power savings, and quite frankly, it sounds like a pretty cool idea.

PortalPlayer Preface runs on Windows Vista, the upcoming operating system release from Microsoft (NASDAQ:MSFT), where the feature also is known as Windows SideShow. Its current partner list also includes ASUSTek, Acer, Quanta, and Compal, and talks are underway with several other potential customers. These may not be household names in the U.S., but the smallest of the four current partners sports worldwide 2005 revenues north of $8 billion, which makes them all bigger than Gateway (NYSE:GTW), for example. It doesn't hurt to be big in Japan and its neighboring countries.

All of that said, PortalPlayer still isn't out of the woods. It cut staff by 14% in June, and CEO Gary Johnson plans to leave the company at the end of the year to pursue other interests. PortalPlayer took its eye off the ball once and lost its most important customer. It can't afford to blow it again, and the success or failure of Preface is likely to make or break the company as a whole. The sooner Vista ships, the better for PortalPlayer. Right now, the business-oriented versions should make their debut in November 2006, so look for those cool Acer laptops around then. The future of one of its component-makers depends on them.

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Fool contributor Anders Bylund doesn't own stock in any of the companies mentioned today. You can see for yourself , thanks to our Foolish disclosure rules .

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