Sat, Apr 28, 2012 - Page 12 News List

MediaTek profit drops on weak prices, demand

By Lisa Wang  /  Staff reporter

MediaTek Inc (聯發科), the nation’s biggest handset chip designer, yesterday posted its weakest quarterly earnings in 10 years as stiff competition cut prices and weak customer demand drove down profits by 24.5 percent annually — albeit at a slower rate of decline than some analysts’ estimates.

After a weak first quarter, MediaTek gave a stronger-than-seasonal grotwh forecast for this quarter. It expects revenue to grow by between 14 percent and 20 percent to NT$22.4 billion (US$764 million) and NT$23.5 billion from last quarter’s NT$19.62 billion, supported by strong demand for new smartphone chips, mainly from Chinese clients.

Smartphone chips accounted for 20 percent of MediaTek’s overall revenue last quarter, as shipments spiked 70 percent quarter-on-quarter to 10 million units, the chip provider said.

MediaTek’s projected revenue growth was well beyond the 11 percent quarterly expansion forecast by Eric Chen (陳慧明), head of Daiwa Capital Markets’ Pan Asia technology team.

Betting on a turnaround in MediaTek’s net profit next quarter, with year-on-year earnings rising for the first time in two years, Chen wrote in a research note to investors: “Get in, once the share price [drops] below NT$250.”

MediaTek’s share price closed at NT$240.50 yesterday, down 6.42 percent from NT$257 on Thursday.

Net profit plummeted 24.5 percent year-on-year to NT$2.5 billion, or NT$2.19 per share, in the quarter ending March 31, compared with NT$3.31 billion, or NT$2.9 a share, in the same period last year. The first-quarter figure was higher than Chen’s forecast of net profit of NT$207 billion, or NT$1.8 per share.

On a quarterly basis, earnings were down 14.3 percent from NT$2.92 billion, or NT$2.56 per share, in the fourth quarter of last year.

However, the growth momentum is expected to pick up this quarter and extend through the rest of the year. MediaTek raised its forecast of smartphone chip shipments this year to 75 million units, up 50 percent from the 50 million estimated three months ago, MediaTek president Hsieh Ching-jiang (謝清江) told an investors’ teleconference.

“MediaTek’s growth is riding on an accelerating trend in which more consumers in China are replacing their feature phones with low-cost smartphones as telecoms operators increased handset subsidies to promote 3G services,” Hsieh said.

MediaTek counts China Mobile Ltd (中國移動) among its 40 clients.

“Low-cost smartphones have increasingly strong appeal to consumers in emerging countries as their prices fall,” Hsieh said.

A low-cost smartphone sells for about US$100 per unit now, he added.

However, he expects gross margin to slide further to about 41 percent this quarter from 42.1 percent last quarter, when it dropped by 4.1 percentage points year-on-year, or 2.1 percentage points quarter-on-quarter, Hsieh said.

The decline in gross margin was mainly due to price competition, he said.

The company projected that the average selling price of smartphone chips would drop by as much as 15 percent, while the price of feature phone chips would fall by 25 percent at the most.

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