Alexa
  • Directory of Taiwan

Shares of MediaTek down despite improved Q3 results

Shares of MediaTek down despite improved Q3 results

Taipei, Oct. 30 (CNA) Shares of MediaTek Inc., one of Taiwan's leading integrated circuit designers, moved lower Tuesday morning on profit taking, even though the company reported an almost 50 percent sequential increase in earnings for the third quarter, dealers said. Investors were worried that MediaTek will cut product prices in the near future to gain a larger market share, which is likely to squeeze its bottom line, they said. As of 11:19 a.m., shares of MediaTek had fallen 1.21 percent to NT$325.50 (US$11.09), off an earlier high of NT$330.50, with 8.17 million shares changing hands. The benchmark weighted index was up 1.28 percent at 7,182.63. "The third-quarter results were widely anticipated by the market, as seen by the stock picking up steam in recent sessions," Mirae Asset Management analyst Arch Shih said. "Today, many investors simply rushed to lock in the gains they had built after the IC designer reported its results on Monday," Shih said. Shares of MediaTek had added 6.46 percent between the end of September and Monday. MediaTek posted NT$4.94 billion in net profit for the third quarter, up 47.2 percent from a quarter earlier, with earnings per share at NT$4.06, compared with NT$2.95 a quarter earlier. Its third-quarter gross margin stood at 41.2 percent from the second quarter's 40.8 percent, while its operating margin for the July-September period rose to 14.4 percent from 11.8 percent registered a quarter earlier. "The improvements reflected solid demand for smartphone chips in China. It came as no surprise that MediaTek raised its smartphone chip shipment forecast for this year after the third-quarter results," Shih said. In the third quarter, MediaTek shipped 35 million to 40 million smartphone chips, higher than its previous estimate of 30 million units. That led the company to revise upward its 2012 smartphone shipment target to 110 million units from the 95 million it forecast in July. Shih said MediaTek is benefiting from a business model in which the company provides a wide range of smartphone chips that appeal not only to high-end phone makers but also budget phone suppliers in China. "But after the good third-quarter results, many investors are now worried about how the IC designer will reach its shipment target, and they suspect it will cut prices to gain a larger market share," Shih said. The analyst said there has also been speculation that rival Qualcomm Inc. will lower its prices to challenge MediaTek's strength in the China market. "Once a price war breaks out, MediaTek is likely to encounter an erosion in its profit margin. That's the last thing investors want to see," he said. (By Jackson Chang and Frances Huang)


Updated : 2021-06-17 11:41 GMT+08:00