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NDS Group's fiscal first-quarter net profit jumped 54% as a steep fall in costs and the roll-out of the company's middleware by DIRECTV made up for a rise of only 2% in revenue.
NDS, which was founded in Israel and supplies technology and services to digital pay-television operators, said on Tuesday that net profit increased to $27.1m. in the three months ended September 30 from $17.6m. a year earlier.
Raffi Kesten, the chief executive of NDS's Israeli operations, said in an interview that the company intends to hire another 70-100 employees this year for its Israel operations, which are based in Jerusalem. NDS already employs almost 1,000 people in Israel out of more than 2,600 worldwide.
Operating profit in the first quarter rose to $35.7m. from $25.3m., earnings per share rose to 49 cents from 32 cents and revenue edged up to $144.5m. from $141.3m. Analyst expectations for EPS ranged from 23 cents to 36 cents and for revenue they ranged from $135.5m. to $151.2m., as compiled by Thomson Financial Network.
Kesten said the company also is raising its forecasts for the fiscal year ending June 30 and expects operating profit of between $107m.-$115m. compared with an initial forecast of $102m.-$110m. It earned $92.2m. in fiscal 2005. NDS also expects revenue to rise to $610m.-$620m. from $556.3m.
Kesten said earnings will be boosted by income from its PVR technology, which allows customers to record TV shows using a set-top box rather than a VCR.
"We signed ten contracts for PVR over the last two years and we will begin deployment this year," he said.
The number of authorized smart cards rose to 58.5 million at the end of the first quarter from 47.8 million a year earlier, the number of set-top boxes that use NDS's middleware rose to 26.7 million from 18.8 million, and the number that use PVR rose to 1.7 mlion from 700,000. Middleware is the operating system used for satellite and cable television boxes and interactive systems.
The company's operating margin improved 38% as costs fell 16% on the year, due to a reduction in research and development expenses and a focus on achieving operating efficiencies, said chief financial officer Alex Gersh.
Kesten said the fall in costs was also due to the company completing the development it carried out for US company DIRECTV, which began to deploy NDS's middleware and started to pay royalties and license fees.
American Depository Shares in NDS, which is a unit of Rupert Murdoch's Newscorp, were up 3% at $37.70 in midday trading on Nasdaq.