US contracts drive TV box maker Pace to recovery in second half

SET-TOP TV box maker Pace upgraded its sales forecast yesterday, saying it expects revenue to be flat this year, having previously predicted a decline on 2011.

The company said partnerships with US TV networks had boosted sales since July, and that the company expects to make up the $181m (£114m) in lost revenue from the first half.

However, shares in the company fell yesterday as analysts warned that the uptick in sales would come as a cost to margins.

“Despite the increasing mix towards newer products, gross margins continue to trend downwards,” Nick James at Numis Securities said, reiterating a “sell” rating on the stock.

Pace put the anticipated growth in the second half down to strong demand for set-top boxes sold by US pay-TV providers Comcast and DIRECTV. “The pay-TV market continues to show resilience despite the uncertain economic conditions,” the company said.

It added that it had finally recovered from the issues surrounding hard drive shortages that had forced former chief executive Neil Gaydon into stepping down last year.

The company said the hard drive disruption had not had any impact on revenues in the second half of the year to date.