Shares in telecommunications equipment maker Tecom Co (東訊) fell at the start of trading yesterday, then rose more than nine percent during the session on the back of rumors that the company had received orders for communications products from a large Swedish company.
Tecom later confirmed that it had signed a memorandum of understanding worth as much as US$15 million over two years involving technological transfer and manufacturing orders with Axis Communications Group.
Axis communications is a Lund, Sweden-based provider of network connectivity and emerging wireless Internet based services listed on the O-list of the OM Stockholm Exchange.
However, Axis later denied that it had made any orders.
"I do not know from where you received that information, but Axis has not ordered anything from Tecom," wrote Jan Sjonell, vice president of the mobile Internet division regional office at Axis Communications in Malaysia, in an e-mail message.
Tecom's stock also benefited from the expected purchase by Japan's NTT DoCoMo Inc of local telephone operator KG Telecommunications Ltd. Tecom owns a stake in KG Telecom and has indicated it will sell two million KG Telecom shares in the fourth quarter of the year to boost its non-operating income.
Shares in Tecom rose 6.94 percent from Wednesday's closing price to NT$30.8 yesterday. All of the nearly 7 percent rise occurred in the last fifty minutes of trading.
"We will have Axis' technology as the guts built into our hardware housing," said Vincent Tsai, vice-president of sales and marketing at Tecom, when asked about the long-term technology cooperation with Axis.
"This should create about US$10 million in revenue" for Tecom over the first two years of the agreement, said Tsai.
At the same time, Tecom will be contracted to manufacture a large order of integrated access devices for Axis in an agreement that should generate US$5 million per year in revenue, said Tsai.
Integrated access devices manage wireless broadband access to the Internet and local area networks through devices with Bluetooth wireless technology, such as mobile phones, personal digital assistants, laptops and webpads.
Axis says it is at the forefront of such technology. Bluetooth is an open standard for short-range transmission of digital voice and data between mobile devices.
The agreement, if it goes ahead, should provide a boost to Tecom's technology capability and its profit margins at a time when it has a reputation for focusing on low-end and low-profit margin telecom products.
Axis' decision to select Tecom is testimony to its expertise and experience in the production of Bluetooth products, said Tsai.
The company said recently that it had begun shipping an original design manufacturing (ODM) order for a wireless Bluetooth digital transmission device -- called Viaggio -- at the end of August to Omron Co, a major supplier of telecom equipment in Japan.
Tecom plans to ship 70,000 to 80,000 sets of the device to the Japanese company this year.
Still, while the development of integrated access devices is considered promising, analysts did not overreact with enthusiasm to Tecom's latest venture or apparent agreement.
"It's good news for Tecom," said Jonathan Chen, an analyst at China Securities Co, but, "I will treat this as a market rumor," he said.
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