Shares in Powertech Technology Inc (力成) dropped to their lowest price in more than three years after it reported weak results in the third quarter and forecast that revenue would continue falling this quarter.
The company, which provides packaging and testing services for memory chipmakers, also said it expected clients to continue inventory adjustments and predicted the situation would not improve until the first half of next year.
The share price of the Hukou (湖口), Hsinchu County-based company, which has fallen 34.09 percent so far this year, dropped by the daily 7 percent limit to NT$42.25 yesterday, the lowest since Feb. 2, 2009, when it closed at NT$41.08.
“[The] PC market is still weak and demand for commodity DRAM has dropped significantly,” Powertech chairman Tsai Du-kung (蔡篤恭) told a quarterly meeting with analysts via an online video conference on Wednesday.
In view of stronger-than-expected demand for tablet PCs and smartphones, Tsai said demand for commodity DRAM had gone and he was not sure whether the launch of Microsoft Corp’s Windows 8 operating system would help boost PC sales.
“Therefore, we are conservative about the PC market this quarter and we believe the industry is unlikely to improve until the second quarter of next year,” he said.
Tsai’s pessimism over the PC market echoed chip tester and packager Siliconware Precision Industries Co’s (矽品精密) chairman, Bough Lin (林文伯), who said on Tuesday he was bearish regarding this quarter and expected a recovery in the PC industry in the first quarter next year.
During the July-to-September quarter, Powertech’s consolidated net income fell by 56.7 percent quarter-on-quarter and 62.2 percent year-on-year to NT$572 million (US$19.53 million), or earnings per share of NT$0.73.
The company, whose customers include Japan’s Elpida Memory Inc and Toshiba Corp, as well as Kingston Technology Co of the US, said its consolidated revenue reached NT$10.64 billion in the third quarter, up 9.6 percent year-on-year.
However, the figure was down 10.6 percent quarter-on-quarter, which Powertech attributed mainly to reduced commodity DRAM shipments as Elpida cut around 30 percent of its orders and part of the commodity shipments were shipped without testing.
Gross margin dropped to 15.1 percent in the third quarter from 20.8 percent in the previous quarter and 22.3 percent in the year before, which Powertech attributed to the low loading rate of the final test for commodity DRAM and the appreciation of the New Taiwan dollar.
To enhance its profitability, Tsai said the company was working to reduce its reliance on the commodity DRAM business, which accounted for about 50 percent of total revenue last quarter, while increasing its mobile DRAM and NAND flash output to meet the strong demand for “smart” hand-held applications and data storage devices.
The company forecast revenue this quarter would likely remain flat or fall by 5 percent to 10 percent from last quarter amid negative market conditions, Tsai said.
“For this quarter, we hope to maintain gross margin at the same level as the third quarter, but it will be a great challenge for us because of weak PC DRAM demand, order visibility shrinking from six months to two months and NT dollar appreciation,” he said.
In the first nine months of the year, the company’s net income totaled NT$3.03 billion, down 40 percent year-on-year, with EPS of NT$3.89. Consolidated revenue in the first nine months totaled NT$31.31 billion, up 5.3 percent year-on-year, while gross margin was down to 19 percent from 23.8 percent a year earlier.
Fubon Securities (富邦證券) analyst Calvin Shao (邵琮淳) yesterday said he held a conservative view on Powertech as he has not seen significant improvement on either its logic IC business or new technology development. Fubon offered a “reduce” rating on the stock, with a target price of NT$53.
Credit Suisse analyst Randy Abrams also cut his target price on Powertech to NT$47 from NT$55 yesterday, to reflect his concern over the company’s weaker profitability outlook with two quarters of difficult conditions ahead.