Sat, Feb 04, 2012 - Page 12 News List

MediaTek net profit disappoints

CLOUDY PROSPECTS:While smartphone chip shipments are rising, average gross margins are forecast to remain weak this quarter amid global economic uncertainty

By Lisa Wang  /  Staff Reporter

MediaTek Inc (聯發科), the nation’s biggest handset chip supplier, yesterday reported its weakest quarterly net profit in about nine years on the back of slower-than-expected demand for chips used in feature phones.

Net income shrank 23.8 percent to NT$2.92 billion (US$98.8 million) in the fourth quarter of last year, from NT$3.83 billion in the same period in 2010. The figure was the lowest since the third quarter of 2002.

On a quarterly comparison basis, October-to-December net earnings also dropped 28.3 percent from NT$4.07 billion.

The fourth-quarter results were lower than the NT$3.41 billion and NT$3.11 billion estimated by Daiwa Capital Market and Credit Suisse respectively.

Full-year earnings were also dismal, with net profit plunging to NT$13.62 billion, from NT$30.96 billion in 2010. It was the lowest since 2002, when the firm earned NT$12.23 billion.

Prospects remain dim for this quarter in the face of global economic uncertainty. The company expects revenue to drop by 10 to 15 percent sequentially to NT$19.2 billion to NT$20.4 billion this quarter, company president Hsieh Ching-jiang (謝清江) told a teleconference.

“Consumers in emerging markets are becoming cautious and conservative about spending” too, Hsieh said.

Last quarter, MediaTek generated NT$22.63 billion in revenue, with mobile phone chips accounting for about 65 percent.

Gross margin could also slide further to 43 percent, the company said.

On a brighter note, MediaTek’s progress in developing smartphone chips is promising.

Smartphone chips delivered higher gross margins than the company’s average of 44.2 percent during the last quarter.

Shipments of smartphone chips this year are projected to hit 50 million units, as consumers in China increasingly switch from feature phones to entry-level smartphones, Hsieh said.

That would represent a fourfold rise from last year’s 10 million units.

MediaTek’s new M6575 chip for smartphones, with a retail price range of 1,000 yuan (US$160) to 1,500 yuan, would be the company’s major growth driver this year, Hsieh said.

“The target was a surprise to us and to the market,” Eric Chen (陳慧明), a semiconductor analyst with Daiwa Capital Markets, said in a report following the investor conference.

That ambitious goal could prompt the stock to outperform the broader market, Chen said.

Chen suggested investors “buy [the stock] on weakness,” meaning when the share price pulls back.

Chen’s six-month target price for MediaTek is NT$318.

The stock closed at NT$292.50 yesterday.

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