Datapulse, which prints CDs for companies, warns that life will be tough due to keen competition and high raw material costs. But it says its strong balance sheet, experienced management team and close relationships with its customers will help it through.

It declared a final dividend of 2 cents.

FY2008 revenue rose 5% to S$73.3 mln, which Datapulse attributed to improved demand and new product launches by customers during Q1 2008.

But higher operating expenses caused net profit to drop 11% to S$13.3 mln.

It generated S$20.3 mln in cash from operations compared to the S$22.8 mln it generated the previous year.

This stock was last traded at S$0.16.

Datapulse has managed to keep its cash flow in the black over the past few years.

But one thing this company has to keep a keen eye on is the future of optical storage.

With thumbdrives and flash memory becoming cheaper and more popular, more companies might prefer to use them to disseminate information or as corporate gifts.

Just think about it - loading a thumbdrive with information is much faster than the stamping and duplication process for CDs and DVDs. Plus, most portable laptops nowadays come without a CD drive but with more than one USB port.

The Internet is also helping to make the CD and DVD obsolete – why bother bringing a CD or DVD around if you can plug into the Internet and retrieve the information from a website?

Ex-Microsoft chief Bill Gates even went as far as to not take any sides in the battle between HD-DVD and Blu-ray, as he believes that DVDs will be made extinct by the advent of digital distribution systems. He calls optical storage “simply the last physical format we'll ever have," and predicts the Internet to rule over all physical media formats.

Although the day when the DVD and CD become obsolete is still far away, Datapulse had better start preparing itself for it.

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