Shares in Pace Micro Technology, the set-top box manufacturer, have fallen by over 40% following news that it has agreed a revised contract with BSkyB that will severly cut into profits.
Under the new arrangement, Pace will now supply its video recorders at a discounted rate until next April in return for a share of monthly subscriptions to the Sky+ service.
As a result, profits are expected to fall by £1.7 million this financial year and by a further £8 million next year although the company insists that the deal will prove advantageous in the long term. Pace marketing director, Andrew Wallace, said he was was convinced that their product would generate “high volumes once the prices come down”.
Pace shares were already in a downward spiral as a result of the demise of one of its main clients, ITV Digital. The company was also forced to cancel shipments of set-top boxes to NTL after the cable company filed for bankruptcy protection earlier this year.
BSkyB is hoping that cheaper video recorders will drive subscriptions to its Sky+ service. Nonetheless, city analysts are warning that the cable slowdown will impact on the satellite broadcaster as fewer households are signing up to the Sky channels available through NTL and Telewest.
