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MediaTek sales dropped 18% last month

MediaTek Inc (聯發科), the nation's biggest handset chip designer, posted a drop in sales of almost 18 percent last night after warning of a deeper revenue decline for this quarter.

Sales on consolidate basis shrank 17.83 percent last month to NT$6.71 billion (US$208 million) from NT$8.16 billion in October, MediaTek said in a statement filed with the Taiwan Stock Exchange.

Last week, MediaTek said that fourth-quarter revenues were expected to drop at a faster pace -- by 15 percent to 20 percent from a record high NT$26.69 billion in the third quarter -- rather than the 10 percent to 12 percent decline forecast earlier this month.

MediaTek said the downward adjustment came following "careful assessment" of its near-term shipment target.

The bearish outlook made by the MediaTek on Nov. 1 dealt a blow to the firm's share prices, which have plunged about 33 percent since then to close at NT$428.5 yesterday, compared to a 9 percent fall of the benchmark TAIEX during the same period.

The company blamed weak demand for consumer electronics such as DVD players and flat-screen TVs along with insufficient component supply -- primarily power amplifiers -- despite the growth in its mobile phone chip business.

Meanwhile, MediaTek's board of directors has approved the plan to issue 5 million stock options on the basis of one new option for every one share held by shareholders within the next 12 months to reward its employees.

The company was the latest local high-tech firm to announce it would issue options for the annual year-end bonus payments.

It will be MediaTek's first option issuance in its 10-year history.

Offering stock options instead of common stocks, which local firms have been doing for the past two decades to retain employees, is one of the major measures local high-tech firms have begun to use to limit the dilution of their earnings.

Starting next month, local companies will be required to book employee bonuses as spending based on their market value.

Taiwanese leading chip design houses' average earnings may drop by 28 percent this year if they pay the same stock bonuses to staff that they did last year, a BNP Paribas' estimate said.

Because of concerns about employees' stock bonuses, BNP Paribas Securities Taiwan reiterated its "underweight" investment rating on Taiwan's chip designers, saying that investors may stay on the sidelines until the uncertainty is cleared up, perhaps in the first quarter of next year.

BNP Paribas, however, still gave a "buy" to MediaTek, citing the company's good long-term growth prospects.
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