Via earnings slump 95 percent on year

Via Technologies Inc (威盛電子), once Taiwan's top chip-design firm, reported worse-than-expected earnings yesterday as sales slumped and the company failed to secure a technology license from Intel Corp to allow it to make Pentium 4-compatible chipsets.

Via said its second-quarter earnings plummeted 95 percent from the same period last year to NT$46 million (US$1.4 million) and sales dropped 32 percent during the same period to NT$5.2 billion (US$152.9 million), far below analysts' estimates.

The company said its customers slashed the amount of money they were willing to pay for the chipsets and other personal-computer-related gear Via produces because of a global industry slump.

"The first half of the third quarter has not been good either," said Ted Lee (李聰結), a vice president at Via.

"The industry is in a bottoming-out period."

Company president Chen Wen-chi (陳文琦) said Via had already turned the corner in sales, as July figures rose compared with June, and in August "company sales should continue to rise."

The second quarter earnings took most analysts by surprise, as earnings per share were about half what the market expected. Via posted earnings per share of NT$0.05, compared with the NT$1.08 per share it earned last year, a 95 percent drop.

Via's poor performance boosted the rising star in the chip-design sector, Mediatek Inc (聯發科技), which makes chips for CD-ROM and DVD-related gadgets. The company took over from Via as the top chip-design firm in Taiwan by generating higher revenues and profits in the first half of the year.

Mediatek reported profits of NT$5.88 billion (US$172.9 million) on sales of NT$13.6 billion (US$400 million) during the first six months of the year. Earnings per share were NT$18.7 over the period.

Via, by contrast, earned NT$1.12 billion (US$32.9 million) on revenues of NT$12.5 billion (US$367.6 million) as sales of its chipsets waned in the face of intense pressure from Intel to keep unlicensed products off the market. The company earned NT$1.20 per share during the period.

"The biggest problem [for Via] is that they haven't been able to take care of the Pentium 4 license," said Yeh Hsien-wen (葉獻文), a chip-industry analyst at Prudential Financial in Taipei.

He also said Via's plan to offset its decline in chipset sales by transforming itself into a seller of complete PC systems was a big risk. "I think this is a tough road to take," he said.

Via and Intel have been locked in legal squabbles since last August, when Via launched a chipset for use with Intel Pentium 4 processors without finalizing a license from Intel first.

Intel says Via needs a technology license, and calls the Via chipsets an infringement on its patents. Via says the license issue is a business fee only, and that no infringements exist. Whatever the case may be, analysts say Via will have a hard time until it mends its ties with Intel.