BF2S Forums ASUS merge with GIGABYTE

Asustek Computer is interested in acquiring another motherboard specialist Gigabyte Technology, which shows better strength in distribution, according to sources in the Taiwan motherboard industry. Asustek's possible merger with Gigabyte is aimed to face rising competition from EMS provider Foxconn Electronics (the registered trade name of Hon Hai Precision Industry), whose motherboard shipments have drawn near the leading motherboard maker, indicated the sources.

Both Asustek and Gigabyte refuted the merger rumors at the Taiwan Stock Exchange (TSE) on August 4. To date, there is no plan about a merger that involves Asustek and Gigabyte, the two motherboard makers clarified in their respective filings with the TSE.

In 2005, Foxconn shipped 40 million motherboards, and 32 million units were OEM shipments. Asustek shipped 52 million motherboards. This year, Foxconn's shipment target for own-brand motherboards was set the nine-million mark, and OEM shipments are also expected to increase.

Asustek is aware of Foxconn's threat that comes from the EMS maker's large-scale financial support and intends to consolidate Gigabyte to secure its leading position in the motherboard industry, market sources observed. If Asustek merges with Gigabyte, the combined company's motherboard shipments may amount to 78 million units in 2006, the sources said. The merger will also help Asustek grab a 45% share of the worldwide motherboard market, by consolidating Gigabyte's strength in the distribution segment and enhancing its high-end portfolio in the own-brand business, the sources noted.

As reported on March 28, Gigabyte already dismissed rumors that the company had been in talks of a merger with Micro-Star International (MSI). Earlier this year, Gigabyte announced that its gross margins dropped below 10% in the first quarter. The motherboard maker's sequential decreases in gross margin since 2003 have been attributed to pressure from industry price wars.

TAIPEI (XFN-ASIA) - Asustek Computer Inc (2357.TW) and Gigabyte
Technology Co Ltd (2376.TW) said they have decided to form a 49:51 joint
venture to foster healthier growth for two strong brands in a largely mature
and slowing market.

Gigabyte will transfer the assets and operations of its branded
motherboard and graphic card business to the joint venture, the companies
announced in a joint news conference.

The venture will have paid-in capital of 8.0 bln twd and is slated to
begin operations in January 2007, they said.

Asustek will put in 4.0 bln twd in cash to the joint venture.

They have yet to decide if Gigabyte needs to make a cash contribution,
pending appraisal of the assets and business operations it is set to transfer
to the joint venture.

They said the team-up for the venture is promoted by the fact that the
industry at large has tended to grow at an increasingly slower pace.

"We are doing this to make possible healthy and positive development
against a largely mature market," Asustek Chairman Johnny Shih said.

"We want to foster healthier growth for both brands."

He said "healthy orders" can certainly accommodate two leading brand
names that both appeal to the medium- to high-end segments of the market.

The joint venture will have a board of five directors and two
supervisors. Gigabyte will assign three directors and one supervisor, while
Asustek will have the remaining seats.

Asustek and Gigabyte hold a combined share of up to 80 pct of the global
motherboard market.

According to statistics compiled by Taiwan's Institute for Information
Industry, the global motherboard market grew just 2.2 pct in 2005 to 8.09 bln
usd.

In the first half of the year, global output of motherboards shrank to 3.
67 bln usd from 3.75 bln in the same period a year ago.

Austek Computer closed today's trade up 1.00 twd at 74.20, while Gigabyte
was up 0.20 at 22.10.

We saw a surprise announcement from ASUS and Gigabyte in a press conference that took place today in Taiwan where a new company is borned with a capital of NT$8B or US$244M. Gigabyte Channel Business Unit comprises of motherboards and graphics cards business is detached from Gigabyte and a new company is formed together with ASUS investing in it. The "old" Gigabyte will only comprises of networking communication, digital home and PC systems. The share allocation of the new company is 51% Gigabyte and 49% ASUS but the company name is not confirmed yet. The brand name of the products from this new company will still be Gigabyte and will start its operation from 2007 onwards. ASUS will continue as per normal selling ASUS branded motherboards and VGAs. Perhaps the new company will be called Gigasus.

Last edited by Reizors (2006-08-08 06:45:59)