Bottom Line: Healthy tiddler

THE MARKET greeted Tadpole Technology's loss before tax of pounds 1.2m and its plan to raise pounds 6.8m to fund an increase in working capital with characteristic enthusiasm. The shares hopped up 31p to 316p.

The company's broker forecasts full-year profits of pounds 3-4m, leapfrogging to pounds 10m next year. Yet the price-earnings ratio of over 70 is about four times the sector average.

For scholars of blue-sky stocks Tadpole is an interesting study. Unlike many technology tiddlers it already has successful products. These include the highly-regarded Sparcbook portable workstation and the equivalent it is making for its 10 per cent shareholder IBM. Sales revenues are likely to grow significantly.

Tadpole also has production relationships with IBM and Sun Microsystems, the world leader in workstations, and a new product development agreement with Digital Equipment Corporation.

Successful mating with prestigious partners is a useful sign that there is nothing obviously wrong with a small technology company and can be a far more positive signal.

A small firm in a skill-intensive business is likely to have some difficulty managing its growth. Yet Tadpole's main drawback for prospective investors is that the shares already trade at such a high rating.

The company's plans to seek a US listing on Nasdaq later this year could just outweigh this, since American investors tend to be even more enthusiastic about blue-sky stocks than the British.