Diamond multimedia moves out of the rough.

Once left largely for dead, one-time computer chip powerhouse Diamond Multimedia may be turning things around.

At least that's the plan. The Chatsworth-based chipmaker is basing its hopes for new life on new management, its brand name and that of its new partners, chipmaker and designer ATI Technologies Inc. and streaming media software developer Orb Networks Inc. The pending release of Microsoft Inc.'s Vista operating system could provide a major boost, too.

The new owners--Bruce Zaman, chief executive and president, and Terry Hamm, marketing and sales maven--believe that the broad-based nature of the firm's offerings--which enhance and upgrade computer graphics and sound--is significant.

"Not only do we do graphics cards, we do sound cards, we do TV tuners, we do all sorts of communications products," Zaman said.

With a computer chip market that shifts almost daily, Diamond--which expects to see revenues of around $24 million this year and $30 million next year--has its work cut out for it as it bids to reclaim its former status as a leading creator and producer of sound and graphics microchips.

To get there, Zaman said Diamond would build cards around the chips that are used by the most popular game stations and cell phones. The company's cards range in cost from $29.95 to as much as $400 or $500 for the best graphics and sound cards. Marketing chief Harem knows that name recognition will be crucial for Diamond's future.

"As a company, the brands that we're involved with are as important as the technology," Hamm says. ATI, one of the industry's leading graphic chip designers, would seem to fit the bill for Diamond.

The ATI alliance is one of the reasons e-commerce supplier Newegg Inc. recently signed Diamond for its partner program, whereby New Egg will promote, facilitate and profit from Diamond sales.

"It's always funny, when you ask around about Diamond people always ask, 'Are they still alive?'" said George Cheng, a buyer for New Egg's heavily trafficked Web site. New Egg last year had about $1.5 billion in revenues and Cheng is convinced that Diamond's products--enhanced by ATI--can be a significant part of this year's take. Microsoft's introduction of its Vista operating system--now set for February 2007--will be a significant sales catalyst, Cheng believes.

"It's so important for the entire industry," Cheng said. "It will force everyone to upgrade the experience. All the core companies, specifically the graphic card companies, are poised to take advantage of this opportunity."

Comeback tale

If Diamond can indeed turn itself around, it will be an impressive comeback tale.

The chipmaker built its reputation in the 1990s with popular sound and graphics cards such as Stealth, Viper, Supra and Monster Sound. In those days, Diamond had major league equity in its brand name, which had gained favor throughout the U.S. and in Europe and South America. Its marketing budget alone was nearly $30 million.

In 1998, Diamond looked to be on the verge of a windfall when it introduced its MP3 player through the Diamond Rio label. Sonic Blue then bought out the Diamond label and was eager to bolster the product and put some financial heft behind the rollout, which it did at the expense of the other sound and graphic card brands.

"They put all their eggs in one basket," says Zaman. "The brands were left to die. They were left dormant," Hamm added.

Then came the iPod from Apple Computers Inc., which not only immediately took over the market, but also rendered virtually irrelevant any competitors, including Sonic Blue.

"They just ran out of money," says Zaman. Sonic Blue, which had created a separate company to handle the Diamond player, known as S3, ultimately filed bankruptcy and sold Diamond to Zaman's Best Data in 2003.

"In 2000, the iPod had asserted itself in the marketplace," Zaman said. "It was 90 percent iPod and 10 percent for everyone else."

Back to the future

Diamond is relaunching its "Supra" brand of high-speed modem and graphic card lines Stealth and Viper. Diamond also offers an exclusive line of software--Diamond Tools--free to its customers. It's Overlocking tool, which speeds up game performance, has been its most popular.

As for customers, Diamond has its alliances with manufacturers Dell Computer Corp. and Hewlett Packard, as well as retail stores including Circuit City, Radio Shack, Office Max, Staples and Office Depot.

The company is also looking beyond the sound and graphics cards market. Through its partnership with Orb Networks, a developer of media-delivery software and services, Diamond is introducing the XtremeTV TV Tuner/PVR. It's a personal video recorder capable of providing personal computers or laptops with TiVo-like qualities that can be remotely accessed so that users can view live or recorded TV from anywhere with a broadband Interact connection. It also gives them time-shifting features that allow users to schedule recordings to watch later from any Interact-connected device.

"Remote home viewing represents the next frontier in television functionality, moving form the time-shifting of TiVo-like devices to complete place shifting, using the Diamond PVR," Zaman said. "Remote viewing of the home television is a quickly growing space."