Archos, an electronics company that pioneered MP3 players in the early 2000s but lost out to Apple's iPod, hopes to boost sales by beating its larger US competitor to market with touch-screen tablet PCs.
The company expects to return to sales growth in the fourth quarter for the first time in two years, helped by Christmas sales and the launch of the new product — thin PC devices mid-way between smartphones and netbooks.
"We are coming back with a new technology, which is the Internet tablet based on (Google's) Android. It's a platform which is rivaling the iPhone's," Archos founder and chief executive Henri Crohas told Reuters in an interview.
Archos, whose name is an anagram of the founder's, last week unveiled a €17 million ($25.6 million) capital increase to help pay for marketing and developing products in a move that also opens the door to a possible takeover of the company.
"For our development, if a big player enters, or even launches a takeover bid, I don't know, I am not opposed to that," Crohas said.
Archos still expects sales to decline slightly to below €70 million this year from €73.9 million in 2008, but Crohas hopes its new products will lead to rising revenue next year.
The company also expects to post a third consecutive annual loss this year.
"Thanks to (the new products), we already know this quarter will be the first quarter of growth for two years, so the situation is turning around," Crohas said.
In 2000, Archos launched the first hard-disk MP3 player, one year before Apple's best-selling iPods arrived on the US market. That year and in 2001, Archos made 90% of sales outside France, with the biggest chunk in the US.
But Apple, with its elegantly designed products, its bigger commercial clout and clever marketing strategy, quickly dwarfed Archos' sales and confined it to the upscale market, where it struggled to reach a wider audience.
Shares in Archos have dwindled to around €3 from a peak of €76 in 2006, giving it a market value of about €27 million, compared with Apple's $180 billion. The stock jumped 21% on Wednesday to €3.60.
"What happened is that we let ourselves get imprisoned in a niche," Crohas said. "In the €100 to 200 range, Apple dominates. We were pushed above €300."
Apple is expected to launch a highly anticipated but unconfirmed tablet device next year.
Archos also competes with Samsung, Nokia and Creative Technologies. It was founded in 1988 and listed its shares on the stock market in 2002.
Crohas said the group had launched a series of breakthroughs in the electronics markets, but they had often hit the market before consumers were ready to adopt them, and the company did not have the clout to impose its standards.
After a first capital increase in 2006, Archos chose to renew its business model to make cheaper products and decided to outsource manufacturing to China. Crohas sees this move as strategic for the group's rebound in future years.
"Our losses in past years were made mostly on stock write-offs," Crohas said.
With the latest rights issue, Archos' top two shareholders — Crohas and American technology group EchoStar — will lose their majority stake, the CEO added.
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