VIA Technologies Inc's (
VIA, whose chipsets control the flow of data between the processor and other parts of a computer, said net income in the three months to June 30 dropped to NT$1 billion (US$29 million) from NT$1.7 billion a year earlier. That's worse than the average NT$1.2 billion forecast by analysts.
VIA, which has 40 percent of the US$3 billion global chipset market, doubled its market share in less than three years because Intel didn't make enough chipsets to meet demand for its earlier processors. The biggest chipmaker is now trying to shut out VIA by denying its largest rival a license for the Pentium 4, giving permits instead to two smaller chipset designers.
"Investors will have to adjust their earnings expectations for VIA," said Aaron Pong, who helps manage about US$200 million in Asian investments at RBC Investment Management (Asia) Ltd. "VIA got into the business at the right time when Intel didn't regard the chipset business as important or think it will face much competition. With the Pentium 4 it's a different story."
Last week, Silicon Integrated Systems Co (矽統科技) and Acer Laboratories Inc (揚智科技), which have Intel's license, said they will introduce some of the first chipsets to work with the Pentium 4.
Manuela Mercandelli, a VIA spokeswoman, said before the earnings were released that the company slashed prices to boost sales in the second-quarter to NT$7.3 billion from NT$7 billion in the period last year. She did not comment on the company's earnings today.
Intel has sold a Pentium-4 based chipset since November last year and will introduce new chipsets based on the 2-gigahertz processor this year. VIA, which began selling Pentium-4 chipsets this month, said it does not require a license for their sale, a claim Intel refutes. The dispute will probably continue in the future, some analysts said.
"Every major change in technology will involve a new license and that will be a big risk as VIA's chipset designs depend on processors designed by Intel," said Sharon Su, head of technology research at UBS Warburg Securities Taiwan Ltd.
Further depressing the outlook for VIA's earnings are sliding computer sales.
Worldwide PC sales fell in the second quarter for the first time in 15 years, and they may not rebound soon. Dell Computer Corp, the biggest direct seller of computers, said last week its third-quarter profit will miss forecasts and predicted the slump may last until next year.
Falling orders from the US, the biggest buyer of Taiwan's exports, is squeezing profit at VIA and other electronics makers.
The company earlier said that second-quarter sales rose 4.3 percent from a year ago to NT$7.3 billion after it slashed chipset prices to boost sales.
The company's shares fell NT$3, or 1.5 percent, to NT$206 yesterday. The stock has fallen 30 percent in the last six months, compared with a 22 percent decline in Taiwan's key TAIEX.
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