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Here's some more insight into the news regarding VM Labs filing for bankruptcy, from Consumer Electronics Daily:
Copyright (C) 2001.
Warren Communications News, Inc.
All Rights Reserved.
CONSUMER ELECTRONICS DAILY
Thursday, December 6, 2001 Vol. 1, No. 36
Today's News
VM LABS TO FILE FOR BANKRUPTCY in bid to preserve Nuon chip technology. Private consortium seeks patents, key assets.
(P. 1)
VM LABS TO FILE FOR BANKRUPTCY AS CONSORTIUM SEEKS PATENTS:
Ending months of uncertainty about its future, DVD technology company VM Labs is in process of filing for Chapter 11 bankruptcy protection. VM Labs executives said filing was part of strategy to allow its Nuon chip technology to go forward without debt that had crippled company for last year.
Sources close to situation described complicated maneuver to save Nuon technology that's used in Samsung and Toshiba DVD players, and planned models from Oritron and others. Sources told us private consortium led by Alex Lushtak, Genesis Microchip chmn., had provided capital to continue operations and had purchased promissary notes from VM Labs' secured creditors, Motorola and VentureTech. Latter is venture capital arm of Taiwan Semiconductor Manufacturing. Genesis has announced plans to acquire video processor developer Sage and its Faroudja subsidiary.
Arrangement puts consortium in position to take control of VM Labs' key intellectual property and other assets in bankruptcy court proceedings. Although involvement of Genesis chmn. raises question of potential synergies involving technologies of Genesis, Sage, Faroudja and VM Labs, sources stressed that Nuon acquisition was being led by parties outside of Genesis.
Putting best face on what had been difficult negotiations, VM Labs founder-CEO Richard Miller said: "After several months of financial difficulties and a severe shortage of working capital, VM Labs has negotiated financing that will allow us to aggressively drive forward our product development, sales and marketing." Bankruptcy filing is
being prepared by lawyers, Miller told us: "Separately, VM Labs has been served with a petition for bankruptcy and we have hired counsel to file petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filing will enable us to focus on operating our business and serving our customers while we finalize the sale of our intellectual property, trademarks, know-how and other resources required to support customers and grow the business. During the Chapter 11 process, we will continue business as usual, including fully supporting our customers and developing our next generation of breakthrough products."
While details remain sketchy, it's believed that if all goes according to plan, new owners could end up owning all key VM Labs intellectual property, Nuon brand and relationships with key customers for fraction of $30 million that's been invested in company during its history.
Bankruptcy filing caps wild ride for VM Labs. Company was founded in mid-1990s by Miller and other former videogame engineers. Strategy was to bring out enhanced DVD players that also played games and other content in hope of capturing casual gaming audience that wanted both movie playback and ability to play games and other interactive content but didn't want dedicated game console. Samsung and Toshiba introduced DVD players in U.S. with Nuon features that included zoom, smooth high-speed scanning and ability to play Nuon-specific videogames and other interactive content. It's estimated that 40,000-50,000 Nuon-enhanced DVD players have been sold in N. America since hardware introduction last year. Samsung recently introduced new model in Europe and S. Korea.
VM Labs encountered difficulty because of higher cost of original Nuon chip compared with standard MPEG chips from suppliers such as ESS, LSI Logic, Zoran. As DVD player prices plunged, that cost differential became crucial factor, with hardware makers looking to cut production expenses wherever possible. Miller said that over last 18 months VM Labs engineers managed to come up with updated version of Nuon chips that he said was 2-3 times more powerful than original, yet its cost was competitive with standard DVD chips. "It opens up the opportunity for VM Labs technology to be in Nuon branded and non-Nuon branded products as well," he said.
Sources familiar with negotiations said new buyers originally had considered abandoning Nuon brand and enhanced content strategy and instead opt to become standard chip maker. But talks with hardware partners convinced them that brand still had value, and new entity is likely continue to offer Nuon brand and encourage studios and game makers to bring out software with features that are accessible only on Nuon players. Library of Nuon-enhanced discs is not large but does include handful of games as well as movies Bedazzled, Dr. Doolittle 2 and Planet of the Apes from Fox Home Entertainment, as well as MGM Entertainment's planned special edition re-release of cult classic The Adventures of Buckaroo Bonzai Across the Eighth Dimension.
Sources said that although VM Labs was entering bankruptcy proceedings with hope of executing above-stated plan, outcome ultimately would be in hands of bankruptcy judge. They said in essence there would be auction for assets that could trigger additional bids. "Our goal is to maximize the value of our assets for our creditors and shareholders," Miller told us.
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There has been much speculation as of late as to whether or not Jeff "Yak" Minter is working on any further titles for NUON. After a message board post turned up stating that he was "no longer tied to the Nuon platform," it was thought that Yak had completely jumped ship from NUON.
