Sat, Apr 21, 2012 - Page 11 News List

Powerchip shares bounce back on positive forecast

RECOVERY AHEAD:The DRAM maker said its Q1 losses would be smaller than first thought, spurring a gain in its share prices despite worries over a possible gains tax

Staff writer, with CNA

Shares of memorychip maker Powerchip Technology Corp (力晶科技) staged a strong rebound yesterday, outperforming the broader market, after the company forecast that its bottom line for the first quarter would improve from a quarter earlier, dealers said.

The comments helped to quell market fears that the company would report a larger net loss for the January-to-March period, compared with the NT$8.86 billion (US$300 million) net loss recorded a quarter earlier, at a time when the DRAM chip business had been in a down cycle, they said.

Powerchip shares closed up 5.56 percent at NT$0.95 after 4.39 million shares changed hands, while the index of the over-the-counter market, where the stock is traded, fell 1.49 percent to 107.45 points amid lingering worries over a proposed capital gains tax on stock and futures investments.

CAPITAL GAINS TAX

The Cabinet said on Thursday night that it would send a capital gains tax proposal by the Ministry of Finance to the legislature in two weeks for approval.

Powerchip shares fell 5.26 percent on Thursday amid market speculation that the DRAM maker would report massive net losses for the first quarter after booking the losses incurred by Rexchip Electronics Corp (瑞晶電子), a joint venture with financially troubled Elpida Memory Inc of Japan.

BILLIONS IN LOSSES

In a filing to the Taiwan Stock Exchange, Powerchip said it expects its losses to narrow to less than NT$6 billion in the first quarter. The company said its accountants are auditing the financial statement.

The company said its core business is estimated to incur a loss of about NT$5 billion in the first quarter and, after including the losses posted by Rexchip, consolidated losses could narrow to less than NT$6 billion from the fourth quarter’s NT$8.86 billion.

The company is scheduled to release its first quarter results by the end of this month.

Market analysts said the improving bottom line was the result of Powerchip assigning part of its production capacity to the profitable foundry business.

Advisory firm Gartner Inc said Powerchip ranked as the world’s 10th-largest foundry service provider last year.

Dealers said the clarification did help to calm many investors, but concerns over the global DRAM sector’s fundamentals remain in place. There are rising concerns that further losses in the DRAM business could drag down chipmakers’ book values, they said.

At the end of September last year, Powerchip’s book value stood at NT$3.51 per share.

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