Thu, Jun 09, 2011 - Page 11 News List

MediaTek posts lowest revenue since February

GREEN LIGHT:The handset chip designer’s bid to take over Ralink Technology was approved by the Fair Trade Commission and will be effective from Oct. 1

By Kevin Chen  /  Staff Reporter

Fierce price competition has continued to place pressure on MediaTek Inc (聯發科), the nation’s biggest handset chip designer, as the company yesterday posted consolidated revenue of NT$6.59 billion (US$229.5 million) last month, down 13.52 percent month-on-month.

Last month’s revenue was the lowest since February and 33.2 percent less than the same period last year, the company’s data showed.

During the first five months of the year, accumulated revenue totaled NT$34.08 billion, down 37.58 percent year-on-year, the data showed.

Deutsche Securities Asia Ltd said yesterday in a note that MediaTek’s slower sales last month had cast a cloud over the company’s short-term outlook.

The brokerage said it now expects MediaTek to report flat sales this month from last month, citing the company’s weaker-than-expected shipments of the new-generation chips for 2G mobile phones — codenamed MT6252 chips — and chips used in 3D TVs.

In April, MediaTek told an investors’ conference that the firm expected April-to-June revenue to grow by between 5 percent and 12 percent to between NT$20.9 billion and NT$22.3 billion, from the previous quarter’s NT$19.87 billion.

COMPETITION

The company’s combined revenue for April and last month reached NT$14.21 billion, which means MediaTek would have to make NT$6.69 billion to NT$8.09 billion in sales this month if it is to achieve its second-quarter revenue predictions.

MediaTek is facing stiff competition in both the lower-end feature phone market and the higher-end smartphone market.

Deutsche Securities said the key near-term risks for MediaTek include sales of the company’s 3.5G chips — used in smartphones — where it is competing with Broadcom Corp and Qualcomm Inc, as well as dealing with intensifying competition from China’s Spreadtrum Communications Inc (展訊) and Taiwan’s MStar Semiconductor Inc (Cayman) (開曼晨星半導體) in the lower-end feature-phone market.

The brokerage yesterday maintained its “sell” rating on MediaTek, with a 12-month target price of NT$232, representing a 26.58 percent downside from the stock’s closing price of NT$316 on the Taiwan Stock Exchange yesterday.

On Tuesday, Credit Suisse downgraded MediaTek to “underperform” from “neutral” and cut its target price on the stock to NT$280 from NT$300.

Meanwhile, the Fair Trade Commission yesterday approved MediaTek’s acquisition of local wireless chipmaker Ralink Technology Corp (雷凌) through a share swap.

MERGER

The commission gave the green light to the merger because the deal would not pose a threat to competition within the domestic handset chipmaking and wireless chipmaking sectors, according to a statement posted on the commission’s Web site.

MediaTek on March 16 said it would acquire Ralink by swapping one of its own shares for 3.15 Ralink shares in a bid to boost its technological capabilities in supplying advanced smartphone chips.

After the merger, which will take effect on Oct. 1, Ralink will become a wholly owned subsidiary of MediaTek.

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