On the back of July's licensing deal with chip maker ARM (and a disappointing interim loss of £4.6 million on sales down at £1.3 million), 3D software developer Superscape is betting everything on the 'mobile internet' market. Elliott Davis reports.

The news came as the company issued a full year revenue warning and announced that 30 per cent of its 120-strong workforce is being made redundant. This is expected to cut monthly cash burn by £250,000, thus maintaining Superscape's £16 million cash pile.

Mike Grant, vice-president of marketing and strategy at Superscape, attributes the decision to focus on wireless technology toward the huge sums of money forked out by telecom companies to secure third generation (3G) mobile phone licences. Grant suggests that in order to recoup their outlay these firms will need to achieve growth of between 5-8 per cent per annum for at least ten years. 'Most people within the sector', he claims, 'expect this gap to filled by advanced messaging services and entertainment offerings'.

Superscape's plan is thus not only to help 2.5G and 3G content producers to develop applications, but also to get the likes of Vodafone and Orange, Nokia and Ericsson to build the necessary infrastructure. It is here that the close relationship with ARM comes in.

Under the terms of the arrangement, microprocessor developer ARM will 'optimise' Superscape's 'Swerve' technology enabling it to integrate with other key pieces of infrastructure, such as Java. ARM will then market the technology to its existing customer base, receiving a share of revenue in exchange.

The deal affords Superscape's chief executive Kevin Roberts the confidence to predict a 'hefty revenue increase' next year with a further 'explosive' rise in 2003.

However, it must be stressed that consumer enthusiasm for 2.5G technology (the impending rollout of which is viewed as the catalyst for the aforementioned growth) is far from guaranteed – remember the widespread apathy that greeted WAP?

Shares in the company tumbled 33 per cent to 25p on the day.