Mosel plans to buy back some of its own shares

Mosel Vitelic Inc (茂矽電子), Tai-wan's third-largest computer memory chipmaker, plans to buy back some of its shares after its stock price fell to a record low to below par value, signaling management is confident in the company's future.

Mosel, which lost NT$8.9 billion (US$257 million) in the first half, will use part of its US$300 million cash on hand to repurchase the shares, said Vice President Thomas Chang (張東隆).

The company will start the buyback as soon as possible following approval of the plan by its accountants.

"It's a good opportunity to buy and enhance the value of the shares," Chang said. "When the share price is low, it's a good opportunity to buy stock options for employees."

Mosel shares slumped NT$0.60, or 6.7 percent, to NT$8.40 on concern loss-making Hynix Semiconductor Inc of Korea will remain in business, extending the glut in the industry. Hynix is the third-biggest memory chipmaker.

Mosel's shares have lost more than a quarter of their value the past five trading days while Hynix shares rose for a week until Monday as investors bet creditors would agree to a US$5.4 billion bailout, its second rescue in three months.

In Taiwan, the NT$10 par value is the minimum price for which a company can sell a share, according to the exchange.

"A share buyback is negative for cash flow, but [Mosel] wants the market to know it thinks its share price is undervalued," said Bryan Chiang, who manages about NT$500 million in stocks at Grand Pacific Securities Investment Trust Ltd (中信投信).

"They're concerned investors will worry about whether they are having operational problems."

Mosel, which is struggling as chip prices remained below their cost of production, plans to raise funds for operations by selling part of its stake in affiliate ProMos Technologies Inc (茂德科技) in the fourth quarter.

Mosel is also considering merging with other memory chipmakers to cut costs, Chang said.

"Everybody's talking with everybody," Chang said. "Everybody recognizes the savings from consolidation."

Mosel shares the same chipmaking technology as rivals Winbond Electronics Corp (華邦電子) and Nanya Technology Corp (南亞科技), Chang said. Merging would cut costs by trimming technology licensing costs and allow the companies to boost expenditure in research and development, he added.