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Asustek, Gigabyte shelve plans for NT$8 bn venture

Asustek Computer Inc (華碩電腦), the world's largest maker of motherboards, and smaller rival Gigabyte Technology Corp (技嘉科技) yesterday announced that plans to form a NT$8 billion (US$242 million) venture have been shelved.

The announcement was made after the boards of both companies agreed yesterday to delay the partnership.

"It takes bilateral willingness to get married," Tony Liao (廖期立), a Gigabyte spokesman, said at a press briefing yesterday.

The plan was delayed indefinitely following concerns from customers, Liao said.

Customers expressed concern that Asustek would absorb Gigabyte, he said.

Shares of Gigabyte had their highest jump in three weeks after the Taiwan Stock Exchange revealed before the announcement that the two Taipei-based companies would disclose a delay to their plans.

Shares of Gigabyte rose 3.1 percent to close at NT$23.10 before the announcement. Asustek's shares dropped 1.9 percent to NT$81.70. The benchmark TAIEX index rose 0.9 percent.

``The news is positive for Gigabyte, because it means Gigabyte will keep its branded business,'' said Ellen Tseng (曾雅蘭), who rates Asustek ``equalweight'' at Morgan Stanley & Co in Taipei and doesn't cover Gigabyte. ``It's bad for Asustek because it means price competition will continue.''

Last August, the companies said they would form a venture to make computer motherboards and graphics cards under Gigabyte's name by the beginning of this year.

Under the plan, Gigabyte would have owned 51 percent of the venture.

In December, Gigabyte spent NT$4 billion spinning off its branded motherboard and graphics card businesses to form Gigabyte United Inc (技嘉聯合), which posted revenue of NT$3.93 billion in the first two months of the year, Liao said.

Asustek chief financial officer David Chang (張偉明) said his company had not invested the NT$4 billion it originally pledged to the deal.

For now, Gigabyte United will be Gigabyte's wholly-owned unit.
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