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Acer sub to buy more IP but forget CPUs

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Chipmaker Acer Labs' over-the-counter listing today appeared to be a hit with investors in Taiwan, but a low initial price meant that almost no one was willing to sell. "Before we listed, the gray market price was around NT$100," said Acer Labs Inc. (ALi) Finance Director, Daniel Chien, "and our initial price is NT$68 (US$2.14), so many, many people wanted to buy, but nobody wanted to sell." As a result, the price hit its 7 per cent daily maximum almost immediately, jumping to NT$72.5 when a single block of 1,000 shares changed hands shortly after the market opened. "It's pretty typical in Taiwan that there are two or three days during which people want to hold on to the stock," commented Daniel Heyler of Merrill Lynch Taiwan, "because it's an IPO, there's this honeymoon period." As the price rises, holders will begin to sell. As a result, volume will begin to increase later in the week, Heyler believes. "Probably after four or five days we'll start to see more activity - and when there's more activity the price is more reflective of the value of the stock." ALi shareholders have allocated ten percent of the Acer Group member's 84 million fully paid shares for the IPO. In anticipation of high demand, around 2.2 million additional shares will be issued, probably at the end of this month, Mr. Chien said. ALi makes a variety of different chips, including chipsets, key components that are part of the main circuit board of all personal computers. "The semiconductor space worldwide is one of the hotter sectors," said Daniel Heyler of Merril Lynch, "It's being driven by a healthy PC sector - Merril Lynch is looking at over 100 percent unit growth this year." This growth in PC demand, coupled with a shortage of some popular chipsets made by market leader, Intel, is drawing attention to the chipset market, said Heyler. "People are in great need of a second source right now and Acer has been in this industry a very long time and has very strong design." "Now the chipset market is very hot," agreed ALi's Daniel Chien, "because of the shortage of the Intel BX chipset. I think the market is giving chipset makers a higher p/e ratio. So we want to issue some new shares to raise some money and improve our financial structure." ALi will buy a new office building he said, "and buy some testing machines and CAD [Computer Aided Design] devices." ALi will also use its new wealth to acquire know-how, commented Heyler. "The need to continue to acquire intellectual property... is a must at this stage of the game - integration is a must. Definitely there will more acquisitions as they move forward." However, Heyler does not expect ALi to join competitors like VIA Technologies in the CPU (Central Processing Unit) business. The smallest remaining independent CPU maker, Rise Technology, has been rumoured to be looking for a buyer. Instead, Heyler believes, ALi will look at ways to integrate more functions into its chipsets. The company last week announced the Aladdin TNT2, which integrates Nvidia's TNT2 3D graphics controller. ®

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