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VIA's monthly revenue likely to fall

"Fifty percent growth [next year] is a conservative projection."

manager of VIA's president's office

VIA Technologies Inc (威盛電子),the world's second largest designer of chipsets, anticipates this month's revenue could fall by as much as 25 percent over last month as orders slow down during the traditionally low season and as motherboard makers continue to work down inventories, an official at the company said yesterday.

Next month's revenue could be even worse as Chinese New Year reduces the number of work days and clients continue to reduce inventories. However, shipments should start to increase from February, the official said.

Even with a substantial fall in revenue this month, VIA will comfortably meet its revenue target for the year of NT$30 billion. It also remains confident that revenue next year will grow 50 percent over this year's figure. Its profit per share could also rise by a third, analysts said.

"Fifty percent growth is a conservative projection," said the manager of VIA's president's office. The company anticipates revenue of between NT$2 billion and NT$2.5 billion in December, the VIA official said. Last month, the company posted revenue of NT$2.7 billion. Analysts expect a figure at the lower end of the prediction.

VIA has seen its monthly revenue fall every month since peaking at a record high in August. A slowdown in personal computer demand during the second half of the year and no substantial pick-up during the fourth quarter, and in particular the Christmas season, has left motherboard makers with excess stock.

The motherboard is a printed circuit board. In a personal computer, it holds the processor, chipset, and other sockets. A chipset provides the interface that allows the processor and other components such as memory to interact. Falling PC demand therefore has a direct impact on VIA's sales.

"PC inventory is still very high," said Huang Han-wei, an analyst at Fubon Securities.

Following a weak holiday shopping season in the US, PC makers such as Compaq Computer Corp and Dell Computer Corp are reported to be slashing prices to move stock amid talk of an imminent price war over the next few months.

"VIA's revenue will probably continue to fall in the first quarter," said Huang, adding that sales should start recovering from July.

When demand does start to pick up again, analysts anticipate stiffer competition for VIA next year with the return of Intel Corp to the chipset market and some possible impact from local chipset maker Silicon Integrated Systems. However, a fall in the price of chipsets should be compensated by lower production costs and the release of new products, as well as VIA's move into the more profitable central processor market.

"This year their CPU generated a big loss about NT$2 billion," said an analyst at Entrust Securities. "Next year, it will be balanced, with no loss," he said.

Chou Sheng-csung, an analyst at Jen-hsin Securities, said that according to VIA's internal estimates, the company expects to earn profits of NT$6 billion to NT$8 billion from its main products, and NT$5 billion from the sale of its processors. It expects its processors to make up about a fifth of next year's total revenue. The company anticipates a pre-tax income of NT$6.8 billion this year. "The company anticipates an earnings per share of NT$15 next year," said Chou, who is predicting an earnings per share for the company of NT$11.5 this year and NT$15.6 next year.

Confidence about the company's prospects next year dispelled concern about VIA's announcement Wednesday that one of its subsidiaries had bought 381 million VIA shares over the last two months.

National Securities Corp said in a morning note that it felt uncomfortable with VIA's strategy to support its stock price and recommended avoiding VIA. In Taiwan, a listed company will generally buy back its shares when its major shareholders are facing financial hardship, the note said. However, VIA denied that it faced such a situation. "Maybe some companies' situation is like this, but in terms of VIA's financial situation, it is still very healthly,"said the VIA official, adding that the company had about NT$7 billion to NT$8 billion in cash before the stock purchases by its subsidiary.

At the same time, with lots of cash on hand, and expectations of strong profits this year and next year, analysts doubted the company or company stockholders were under pressure from banks.
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