TAIPEI, Taiwan -- Via Technologies Inc. said that earnings dropped in the first quarter as PC demand slowed and competition from Intel Corp. intensified.
Via, the world's No.2 core-logic chipset design house after Intel, reported that net profit in the three months to March fell to $31.4 million, 52.2% lower than the $65.7 million profit in the year-ago period. Sales dropped 29% to $208.6 million in the same period. The latest earnings figure included a one-time gain of $6.9 million from selling stocks of a subsidiary.
A lackluster PC market combined with tough rivalry from the Santa Clara-based powerhouse pushed down Via's market share to about 29%, sliding from a peak 40% in the first half of 2001, according to estimates from HSBC Securities Asia Ltd., Taipei.
Via was especially hurt by a lack of a Pentium 4 license granted by Intel, making most tier-one motherboard makers unwilling to use Via's chipsets on concerns of possible patent infringement lawsuits. The two competitors have been in legal battles since last year, and analysts said it would take a while before something works out between the two.
In an attempt to generate new sales, Via recently started entering the optical storage market. The Taipei-based company is setting up a unit which focuses exclusively on designing the solution, company president Chen Wen-chi told investors in Taipei today. Another unit, which targets networking chipsets, is slated to open late this year.
The moves are part of Via's restructuring plan, which was announced months ago, to decrease its dependence on the PC chipset business. So far, Via is shipping one million chipsets per month used in CD-ROMs, with another one million in DVD-ROM beginning in three months, Chen said. Volume shipment of chipsets used in CD-RW is scheduled in the fourth quarter.
Looking ahead, Via remains optimistic, although cautious, about the PC industry in the second half, a typically hot season. "Once the slow 2Q is over, demand should pick up in a steady clip on buying from OEMs," said William Lee, a spokesman of Via. "For now, there are still no signs that point to a strong recovery."
Some analysts agreed. "We expect global PC shipment to grow 20% in the second half from the first," said Steven Liao, an analyst at HSBC. "That should boost sales of Via."
While Via lost share in the core-logic chipset market in the March quarter, Intel's rose to 50% and Silicon Integrated Systems Inc. -- which has a P4 license from Intel and is a smaller rival of Intel -- had a 15% share, some analysts said.
SiS, Hsinchu, Taiwan, earned $700,000 after tax in the first quarter, ending losses in the previous seven quarters. Acer Laboratories Inc., the smallest player in the market which also has a P4 license given by Intel, reported net income of $2.7 million in that quarter.