Shares of MediaTek Inc (—üᢉÈ) tumbled 5.37 percent yesterday after JPMorgan Chase & Co downgraded its outlook for the Taiwanese integrated circuit (IC) designer amid concerns that its development of smartphone chips for Time-Division Long-Term Evolution (TD-LTE) is taking too long, dealers said.

Yesterdayfs selling also reflected fears that MediaTek will suffer a sequential decline in consolidated sales for the first quarter, which is traditionally a slow season for the global semiconductor industry, dealers said.

MediaTekfs shares plunged to NT$388 yesterday, marking the fourth straight day of decline. The weighted index on the Taiwan Stock Exchange was down 0.25 percent.

gBefore todayfs selling, Media-Tek shares had encountered relatively heavy downward pressure in recent sessions as investors locked in earlier gains,h KGI Securities (ŠMŠî暌”) analyst Eason Lee said.

As of Mondayfs close, MediaTek shares had fallen 7.55 percent since the beginning of the year as investors rushed to pocket earlier gains built on hopes that the IC designer would top its fourth-quarter sales guidance.

gThe JPMorgan outlook downgrade prompted more investors to dump the stock, pushing the share price below the NT$400 mark and making it technically weaker,h Lee said.

In a research note released on Monday, JPMorgan downgraded its recommendation on MediaTek shares to gneutralh from goverweight,h while cutting its target price for the stock to NT$360 from NT$420.

According to the US-based brokerage, MediaTekfs sales in China could be hurt by its relatively slow pace in developing chips to use with the TD-LTE technology that will be the backbone of Chinafs future 4G mobile network.

Now expecting MediaTek to launch new chips for TD-LTE use in August at the earliest, JPMorgan warned that MediaTekfs rivals, such as Qualcomm Inc, could capitalize on the opening before then to boost market share in China and hurt the Taiwanese chip designerfs sales.

gAlthough JPMorgan addressed the TD-LTE issue in its latest research note, the impact on MediaTekfs sales remains to be seen. My brokerage is not downbeat enough to say MediaTek shares will fall to NT$360,h Lee said.

gI expect bargain-hunters will emerge as the stock falls to around NT$380 if downward adjustments in MediaTekfs share price continue,h Lee said.

After taking slow-season effects in the first quarter into account, Lee forecast that MediaTek would see its consolidated sales in the current quarter fall between 6 percent and 10 percent from the fourth quarter.

gBut as the IC industry leaves behind the slow season effects in the second quarter, MediaTekfs sales will start to pick up and its sales growth will accelerate in the third quarter,h Lee said.

Lee said MediaTek could report NT$26 in earnings per share for this year, compared with the NT$20 estimated for last year.

By: DocMemory
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