June 11, 2008 – FRENCH portable media player Archos is switching its product strategy to focus on broadband-capable Internet tablets following disappointing results last year with its traditional line of portable media players (PMPs).

At a recent meeting with investors in Paris the French company, which supplies players to handheld IFE specialist the IFE Company and has been associated with at least one other handheld provider, reported 2007 revenues of Eur102 million, down sharply from the previous year’s Eur124 million and well short of a break-even of Eur115 million.

Chief executive Henri Crohas said that the company had pulled out of MP3 music players in the face of declining demand and that a slow production ramp-up for the Archos 605 and 705 Generation 5 portable media players had left it short of stock to meet high demand in the critical Christmas selling season.

On the positive side, Crohas said, was the completion of work to position the Generation 5 range as WiFi-capable PMPs allowing users to obtain new content via mobile Internet. “Our Generation 5 is now positioned as the sole competition for Apple’s iPod Touch,” he said.

The company started this year 2008 with Eur48 million of equity and Eur15 million net cash, and is aiming for revenues of Eur25 million in the first quarter and a total of Eur130 million for the year.

Describing current industry trends, Crohas said that the market for conventional non-connected MP3/MP4 players had grown only slowly in 2007 and was down fully 10 per cent in the first quarter of this year. He contrasted this with the prospects for connectivity-capable PMPs, saying that he expected strong growth on the back of the increasing availability of mobile Internet via WiFi in homes and offices and 3G cellular outside.

The beginnings of pervasive mobile Internet access have pointed the way for Archos’ next wave of product development. Crohas highlighted the failure of stripped-down Websites designed to run on cellphone screens as a means of promoting the development of mobile Internet access. “There’s only one Internet,” he said. “And its pages are all 800-1,000 pixels wide. That means a minimum resolution of 800 x 480 pixels and a minimum screen size of 5in - 4.3in is a compromise and 3in is just too small.”

Archos’ response will be a range of mobile Internet tablets featuring a 5in screen, ultra-low-power X86 processors and the ability to run standard PV applications – including a browser, email, Web 2.0 and 3.0, widgets and plug-ins – from next year. As well as Internet access, the new devices will support Web radio and TV, mobile TV delivered by DVB-T terrestrial broadcast technology, and the rental and purchase of content from the company’s content portal and Paramount-based Media Club.

Last year Archos’ output comprised Generation 5 non-WiFi PMPs (15 per cent), Generation 5 with WiFi (40 per cent) and Generation 4 non-WiFi (45 per cent). Crohas expects the mix to evolve to include basic mobile Internet tablets (60 per cent) and mobile Internet tablets with 3G+ connectivity (25 per cent) by the end of next year.