Hong Kong-based DMX Technologies said today it is planning to get a regular stream of revenue by focusing more on digital broadcasting.

The company, which provides broadband infrastructure and provides digital media content for CATV operators, telcos and satellite companies, recorded a 37% increase in FY2007 revenue growth from digital media content.

It said the business environment for its infrastructure business was difficult due to a mature infrastructure market in Korea and China being slow in rolling out its infrastructure.

Revenue for the segment slipped 6.6% to US$125.8 mln in FY2007.

In DMX’s corporate presentation filed on SGX, it will be providing digital media content for 3G mobile phones and CATVs. It cites the Long Tail theory, which describes the niche strategy of certain businesses with huge inventories that help them realize significant profit out of selling small volumes of hard-to-find items to many customers.

Examples of such companies with inventories that cater to all kinds of consumer tastes are online auctioneer eBay, search engines Yahoo! and Google, retailer Amazon and the iTunes music store.

With this change in business focus, DMX Technologies is changing from being a business-to-business service provider to a more consumer-oriented business. It intends to start with the Chinese media industry and use content as the connecting thread for all its businesses.

As part of its aim to become a media player in China, It has taken an investment stake in a Chinese company that has the rights to operate mobile TV. Once in the consumer arena, DMX is sure to face a new set of risks like fickle consumer tastes, strict censorship rules in China, and potentially keener competition, to name a few.

But rewards could be bountiful - according to CCBN (China Content Broadcasting Network), China has the world’s largest subscriber base in cable TV, currently at 130 mln. And the Chinese government has laid down industry-friendly regulations to digitise all broadcast services by 2015. This is expected to pump up the number of digital TV household subscribers to over 180 mln by 2015.

In a country like China, government regulations often play a role in helping a company flourish, and DMX is most probably hoping its business will be on the good side of government mandates.

As part of the usual routine for companies that are trying out a new business direction, DMX announced on 13 March that it had been awarded an initial contract to implement a provincial scale interactive digital TV platform for a cable TV operator in Inner Mongolia, China. It did not say how much the contract was worth.

At least Aztech proudly announced a S$250 mln contract last month after it said it would venture into supplying construction materials. Perhaps DMX will announce more contracts (one or two?) in the next few weeks.

DMX Technologies is not covered by Reuters Estimates. It was last traded at S$0.216, around the same levels it was trading when it first listed in 2002. It has fallen since and has not recovered to above the S$1-dollar mark since May 2006.

As always, please see your licensed financial advisor before making any investment decisions.

- Tan Jin San