Though still limping from the patent infringement lawsuits that have plagued it for five years, VIA Technologies Inc (
In the latest batch of settlements with MediaTek Inc (聯發科技), the world's top maker of chips for DVD players, Taipei-based VIA agreed to pay a total of US$50 million (NT$1.7 billion) to resolve the patent infringement and trade secret allegations against VIA Optical Solution Inc (威騰光電), which is 86-percent owned by VIA.
PHOTO: TAIPEI TIMES
VIA agreed to pay the first half of the amount, or US$25 million (NT$850 million) this year, Chief Executive Chen Wen-chi (
The second half of the settlement will be paid over the next five years at a pace of US$5 million a year, Chen said.
In exchange, VIA's data storage affiliate will have a perpetual license to any of its copyrights and trade secret plus a five-year license to any of its existing patents that are currently implemented in a VIA Optical data storage product, according a statement released by VIA.
"To a certain degree, the payment will cause some loss for VIA," Chen said.
The huge settlement payment comes at a time when VIA, which used to be the world's largest computer chipset supplier, is striving to return to profitability by riding the global tech recovery.
VIA, a small Taiwanese company capital of around NT$2 billion, was considered a miracle in the computer chip industry when it successfully challenged US chip giant Intel Corp's top position in the 1990s.
"We're not taking on Intel. We're only trying to do the right thing," said VIA's Chen during an interview with a local Chinese-language newspaper in 2001.
Several patent infringement lawsuits have tarnished VIA's reputation, and shrinking market share has hurt sales. VIA's sales slid to a low of NT$20.2 billion in the past years, down from NT$30.9 billion when VIA's operation was at its height.
Last year, VIA resolved its prolonged patent infringement lawsuits with Intel. It started to turn a profit in the first quarter of this year as customers, who were under legal pressure from Intel, slowly came back to VIA.
In the first quarter, VIA eked out NT$51 million in profits, or NT$0.04 per share, after a money-losing 2003, during which VIA lost NT$1.32 per share.
But, that is well below the NT$850 million settlement amount.
Last week, Chen told a press conference that the first NT$850 million payment to MediaTek will be disclosed on VIA's second quarter results as a non-operating loss. The company is scheduled to release their second quarter results late this month.
"Without that expense, VIA would have earned NT$300 million or NT$400 million this year. The costly payment will totally offset VIA's efforts to turn around," said Rex Liu (
VIA is expected to lose between NT$1 to NT$2 per share on revenue of some NT$20 billion this year after the settlement payment, according to the forecast provided by KGI Securities (
On the same day as VIA's announcement of a settlement with MediaTek, D-Link Corp (友訊科技) also agreed to drop breach of duty allegations against Chen and his wife, VIA Chairwoman Cher Wang (王雪紅).
The two developments gave a boost to VIA's share price, which shot up 3 percent to NT$24.4 last Thursday as uncertainties about the computer chipset maker were cleared up.
But as of last Friday, the share price of NT$23.8 on the benchmark TAIEX was still 45 percent below the share price at the start of the year. And there's no guarantee the bounce will turn into a long-term upward trend.
"It could be short-lived," Liu said. "The patents granted by MediaTek are mostly for manufacturing low-margin recordable discs, or low-end products. The question now is whether VIA is capable of developing chips that can compete with rivals."
In a last-ditch attempt to regain lost ground, in July VIA hired Kelly Wu (
Wu worked for nearly two decades at Intel, before switching to a new career at its biggest competitor.
"It's true that Wu will give a boost to VIA, which lacks marketing talent," KGI chip industry analyst Aaron Jeng (
The team is working in areas beyond computing, including MRT ticket cards and consumer electronics gadgets such as mobile phones and DVD recorders.
"But we don't think a management change will be a cure-all for VIA," Jeng said. "The company still has a long way to go before it starts to enjoy the fate of the high-margin products."
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