Matrox in reshuffle to beat graphics downturn

Matrox has rolled out a restructuring programme to combat price erosion in the graphics card market, throwing the future role of its channel partners into doubt.

The Montreal-based company, which employs about 1,500 people worldwide, claimed the global market for graphics cards has shrunk from $3 billion to $2.25 billion in the past year.

It has trimmed its North American staff by about 70 in the past few weeks and will transfer the majority of production to low-cost facilities in Ireland and China.

Matrox will also refocus and streamline its sales and marketing strategy.

However, some partners raised fears that Matrox could sell direct. A Matrox representative refused to comment when asked if the company was considering selling direct or changing its two-tier distribution model, adding that a decision would be made shortly.

Matrox recently stated that its revenue for 1998 would be down from $690 million in 1997.

'Dramatically reduced prices for graphics accelerators, increased competition in the market and Matrox's ageing product line were major factors in the lower-than-expected revenue,' said the representative.

Dev Dutt Tyagi, director of components distributor Boston, said he could not comment on Matrox's global strategy, but added: 'If it has made a mistake, it was a year ago when production problems led to a loss of loyalty among customers.'

Dutt Tyagi said he believed the company was 'on the mend', and had learned from mistakes in the past.

He continued: 'The approach Matrox has taken of late has been refreshing.'

Last week, rival 3D Labs revealed net losses of $18.1 million for the second quarter to 30 June, on revenues of $8.9 million.

Losses were mainly the result of 3D Labs' acquisition of graphics board supplier Dynamic Pictures (DPI) on 14 July, in a stock-for-stock deal worth about $15.5 million.

3D Labs said it would cut about 15 per cent of its workforce due to overlap following the DPI acquisition, but job losses would occur only in the US.

Commenting on the state of the graphics chips market, Tim Lewis, marketing director of 3D Labs Europe, said: 'The low-cost end is not a nice place to be at present. The channel can only absorb so much and now it is full.'

Lewis said the acquisition of DPI would enable 3D Labs to expand channel activities in Europe. 'The graphics board market is much more niche and specialist.'