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Zucotto Systems Inc., an Ottawa-based startup, is set to announce a deal with PacketVideo Corp. of San Diego to bring content to wireless phones and other handheld devices.

Zucotto, which is causing a stir in the venture capital community, is also in final negotiations with three of the world's largest phone manufacturers for its wireless chip and is poised to announce a US$12-million to US$15-million financing round with prominent investors, including Toronto-based MM Venture Partners, XDL Intervest Capital Corp. and VenGrowth Funds. The financing is expected to be followed by another strategic round worth US$30-million involving major U.S. venture funds, including Sun Microsystems Inc., Texas Instruments Inc. and Intel Capital.

Tomorrow, Mark Wells, chief executive of Zucotto, will unveil the company's new name: Zucotto Wireless Inc. at the launch of its new research facility in Ottawa. The name change is to "better reflect the company's focus on the wireless market. We're now working with most of the manufacturers of cellular phones to integrate high performance Java processing into their phones and wireless products," Mr. Wells said.

The deal with PacketVideo, which will use Zucotto's chip to enable streaming of such content as movie, sports and news highlights on wireless devices, is a major coup for the year-old Zucotto. PacketVideo takes title as the first company to make MPEG-4 video streaming commercially available to mobile devices.

Entertainment giants Time Warner Inc., Sony Corp. and Universal Studios Inc. have agreed to participate in product trials PacketVideo is conducting in 11 countries. PacketVideo is also backed by investors that include members of the Rockefeller family, Intel, Qualcomm Inc., Siemens Mustang Ventures and Sonera Corp.

Zucotto makes semiconductors, it says, that dramatically increase the functionality of cellphones and other wireless devices. The company's second product, a Java-based development kit helps equipment vendors and other service providers significantly reduce time to market for Internet-enabled services. But it is Zucotto's Xpresso chip that seems to be the big winner among the major phone companies that are racing to jump-start wireless multimedia capabilities for next generation phones.

Mr. Wells, a native of Vancouver, is a former general manager of Intel Corp.'s wireless division who is also credited for helping bring Nokia Corp. into the wireless market in the early 1990s. At the time, Nokia was known for making rubber boots and tires.

Zucotto expects to start generating revenue in the next two months and says its chips will be available in the fourth quarter. The company, which has grown from 30 people in February to 90 today, hopes to capture US$40-million worth of business in 2001. Industry figures suggest by 2003 there will be more than one billion wireless handsets sold.

Zucotto was founded in August, 1999, by Mr. Wells, Ronald Dicke, Dariusz Otreba, Guillaume Comeau and Mike Majid. The firm is in the process of opening offices in Korea, Japan and Denmark.

It is named for an Italian chocolate cake after the founders couldn't agree on a name.

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