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Inventory cutbacks torpedo VIA's sales forecasts

Structural blip, not lower demand

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VIA Technologies tried its best to keep out of the limelight today as it reduced September revenue forecasts to NT$3 billion.

The chipmaker sought to distance itself from Intel, which last week issued a profit warning, citing reduced PC demand in Europe.

The September sales shortfall is normal, VIA says. It's nothing to do with slowing PC demand, it insists. It just so happens that September is the end of the third quarter, and customers are cutting back on inventory to pretty the numbers for their own quarterly financial statements.

You watch, VIA says, revenue growth will pick up again in the booming fourth quarter - and should exceed its August record of NT$3.8 billion. Anyway, revenue of over NT$3 billion for the month isn't bad, it said.

But for August's revenue to have increased by over a third over July's, and then for September to be flat has financial analysts and markets wondering whether VIA is telling the whole story. The plunge in VIA's stock price yesterday was just within the maximum seven percent limit. The stock has lost nearly a fifth of its value in the last 13 trading days.

VIA's motherboard and systems maker customers may well be tidying up their inventories to polish up their third quarter financial statements, analysts are saying. But their reluctance to carry a large inventory has the finance experts asking questions.

"Why do they want to clean up their inventory?" asked Abraham Leu, head of Asian technology at Prudential-Bache. "Because they have built up too much inventory," he said. If demand were normal, motherboard makers wouldn't be bothered about a high inventory. But now, inventory is too high as they can't get more orders, said Leu. "PC demand is slowing down inevitably," he said. ®

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