GigaMedia Ltd (和信超媒體) is set to trade out its Internet service business as tougher competition forces it to shift its focus from Internet-access services to content, a source at the Nasdaq-listed Internet company told the Taipei Times yesterday.
"For months, our company has talked with several Internet Service Providers [ISPs] regarding the possibility of cooperation -- including selling off our Internet service members," said a senior official at Gigamedia on condition of anonymity.
Local media has speculated that fixed-line operator Eastern Broadband Telecom Ltd (
Telecom analysts, however, believe GigaMedia is going in the right direction to stay competitive in the market, saying that the ISP sector is the company's biggest financial burden.
"The Internet service price war is tough and the cost of Internet-bandwidth is still sky-high, GigaMedia can hardly make a profit from it," said Nathan Lin (
To take its shareholders' interests into account and to break even as soon as possible, GigaMedia has no choice but to retreat from the Internet service market, he added.
GigaMedia, which began trading on the Nasdaq in February 2000, has seen its stock fall nearly 88 percent since then.
Shares of GigaMedia rose US$0.08 to US$1.1 Wednesday on the Nasdaq.
The company's chief financial officer, Winston Hsia (
A local Chinese-language newspaper reported yesterday that GigaMedia has signed a letter of intent with Eastern Broadband, saying the latter will absorb GigaMedia's 130,000 Internet-service users.
As of press time, GigaMedia had not commented on this report. But a company executive had said recently that small ISPs have to link up with each other to compete with market leaders.
"State-run Chunghwa Telecom Co (
According to the Market Intelligence Center (MIC, 市場情報中心), Chunghwa currently serves more than one million users, or about 80 percent of Taiwan's broadband Internet-service market, while Eastern Broadband and GigaMedia have 210,000 and 130,000 subscribers, respectively.
Eastern Broadband would become the nation's number two ISP with 340,000 members if it takes over GigaMedia's members.
Meanwhile, another industry watcher said GigaMedia's future lies in its content business.
"Through selling online content such as music, movies and games, GigaMedia is very likely to make a buck," said Yen Ming-chi (
For Eastern Broadband, the alliance also brought some synergy.
"With more users connecting to the same network, the average Internet-bandwidth cost will definitely drop," Yen said.
He added that, since members of the two companies can use the same billing system and customer service center to reduce overheads, both GigaMedia and Eastern Broadband may gradually lay off some redundant personnel if they do go through with the alliance.
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