MediaTek Inc’s (聯發科) third-quarter consolidated revenue fell about 6 percent from the previous quarter after the company yesterday reported lower sales for last month amid intensifying price competition and weak demand in emerging markets, China in particular.
During the July-September period, the Hsinchu-based chip designer accumulated NT$28.13 billion (US$906.5 million) in revenue, down 6.08 percent from NT$29.95 billion made in the second quarter.
The third-quarter decline was greater than Credit Suisse’s expectation of a 4.9 percent decline to NT$28.5 billion and Citigroup’s estimate of a 3.34 percent fall to NT$28.95 billion. But it was better than MediaTek’s June 30 forecast of a decline between 8 percent and 15 percent quarter-on-quarter.
Last month’s sales fell 1.82 percent to NT$9.86 billion from NT$10.04 billion in August, -MediaTek said in a filing to the Taiwan Stock Exchange.
Because of fierce price competition from rivals, which caused the company to cut prices across the board, Citigroup said the company’s average selling price (ASP) could decline by between 10 percent and 15 percent quarter-on-quarter in the fourth quarter.
“We are currently assuming -MediaTek’s fourth-quarter sales to be flat from the third quarter, which is also subject to a 5 percent to 10 percent downside risk due to sharp ASP erosion,” Citigroup analyst Kevin Chang (張凱偉) said in a note yesterday.
Chang said he now expected MediaTek to post revenue of NT$28.87 billion in the final quarter of the year and predicted the company would see an increase of about 4 percent for its full-year revenue this year from last year.
As such, Citigroup yesterday maintained its “sell” rating on -MediaTek shares, with a target price of NT$320. The stock yesterday rose 0.48 percent to NT$414.5, ending three consecutive losing sessions.
Credit Suisse on Wednesday downgraded MediaTek to “underperform” from “neutral” and slashed the target price for the stock to NT$370 from NT$450.
“[The] 2.5G price competition is eroding the addressable market and margins, and 3G remains limited due to slow emerging market penetration, rising technical challenges and fiercer competition from Qualcomm,” Credit Suisse analyst Randy Abrams said in the report.
On weaker pricing and margins, Abrams cut his fourth--quarter projection for MediaTek. The handset chip designer now is expected to generate NT$26.39 billion in revenues, down 7.4 percent, rather than increasing slightly to NT$29.27 billion from the third quarter.
Net income would plunge about 22 percent to NT$6.02 billion in the fourth quarter, from an estimated NT$7.7 billion in the third quarter, as gross margin is expected to drop to 49.1 percent from 52.4 percent during the same period, according to Credit Suisse’s estimate.
Additional reporting by Kevin Chen
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