Transcend Information saw net profits erode 21.9% sequentially to NT$399 million (US$12.56 million) in the second quarter of 2010, due to losses in inventory value arising from recent weakness in chip prices, according to the Taiwan-based memory module maker.
The earnings translated into a net EPS of NT$0.94 for the second quarter, the lowest since the fourth quarter of 2007 when Transcend posted profits of NT$0.65 a share.
Transcend generated consolidated revenues of NT$6.74 billion in the second quarter, down 18.7% on quarter as opposed to its previous estimate of sequential growth. Sales in April and May were hit by Europe's credit crisis, and also by inventory depreciation due to chip price falls.
Transcend's revenues for the first half of 2010 amounted to NT$14.9 billion, down 2.9% on year. Net profits for the six-month period were NT$910 million, sliding from NT$1.82 billion posted a year earlier.
Europe played the largest contributor to Transcend's revenues in the first half. According to a company presentation material, the region accounted for 32.36% of Transcend's total revenues in the period, followed by Asia Pacific with 29%.
As for sales breakdown by product, NAND flash devices (memory cards and USB drives) contributed 50.3% to Transcend's revenues in the first half. DRAM modules and others accounted for 30.2% and 19.5%, respectively.
Transcend chairman Peter Shu expressed optimism about the company's earnings performance in the second half of 2010, as concerns about inventory losses will be eased.
Shu commented that there is no room for price reduction for DRAM chips. Current prices have reached a level that encourages PC suppliers to increase the memory content for their products, Shu said.
As for NAND flash chips, prices would also have little room to drop in the second half, Shu indicated. Pricing pressure should not be seen until suppliers' new capacity comes on line in 2011, Shu added.
Transcend revealed it had NT$5.22 billion worth of inventory as of the end of the second quarter, including NT$1.1 billion worth of DRAM chips and NT$2.9 billion of NAND flash.