Realignments at Sunplus Tech lead to drop in profits

Sunplus Technology Co (凌陽科技), one of the nation's biggest suppliers of chips for consumer electronics, reported yesterday that its net profits dropped 30.6 percent year-on-year to NT$2.06 billion (US$64.03 million) last year from NT$2.97 billion as a result of its business realignment.

Revenues also slid by 46 percent year-on-year to NT$9.21 billion last year from NT$17.07 billion a year ago, the company said at an investor conference.

"The decline was mainly due to the spin-off of our two subsidiaries that took place at the end of 2006," Sunplus marketing manager and deputy spokeswoman Ann Lai (賴玫蓁) said.

Sunplus spun off its two subsidiaries, Sunplus Innovation Technology Inc (凌陽創新) and Sunplus mMobile Inc (凌陽電通) on Dec. 1. 2006. The parent company still owns a controlling stake of 92.59 percent and 94.58 percent, respectively.

In the fourth quarter of last year, Sunplus' net profits fell to NT$169 million, or NT$0.3 a share, from NT$346.5 million, or NT$0.62 a share, in the same period of 2006. Revenues slid 37.6 percent year-on-year to NT$2.08 billion last quarter.

Despite this, Lai said Sunplus' gross margin still managed to climb to 42.5 percent last year from 33.5 percent a year ago as a result of the US$40 million the company received from licensing its digital TV system-on-chip (SoC) intellectual property to Sunnyvale, California-based Silicon Image Inc.

Regarding the outlook for the first quarter, chief executive officer Huang Chou-chye (黃洲杰) said he projected a 15 percent decline in business, without giving further details. He said the company would work on differentiating its products in the market in a bid to improve its gross margin.

Sunplus spokesman Wayne Shen (沈文義) said the company's sales growth of SoC DVD players this year will depend on seasonal factors as the market has already reached maturity.

"Our TV integrated circuit solution is estimated to see the largest growth from 10 percent last year to between 20 percent and 30 percent this year," Shen said, adding that Europe and the US would become the biggest markets for Sunplus products.

Jonah Cheng (程正樺), vice president of Merrill Lynch Global (Taiwan), said yesterday that the launch of new products would become the key for Sunplus' growth this year.

"Sunplus' performance last quarter was worse than expected, and the first quarter is not looking bright either as it is the traditional low season," Cheng said.

An analyst at a Swedish brokerage who wished to remain anonymous, said Sunplus mMobile Inc and Sunext Technology Co (宏陽科技), which both reported losses of around NT$600 million and NT$300 million last year, raised concerns, as the two companies require longer research and development times and expenses. Nonetheless, the strategic alliance that Sunplus is seeking this year will help clarify their position in the market, the analyst said.

Sunplus' shares rose 0.59 percent to close at NT$34.2 on the Taiwan Stock Exchange yesterday.