03.15.2001
The winner takes all . . . or a fall ?

• The joint Ambit Microsystems Corp. (2386 'Guo Dian') and Alcatel bid was announced yesterday as the sole winner of Chunghwa Telecom's (2412 'Chung Hua Dian') 1.26m ADSL outsourcing contract.

• Ambit will take a NT$2.8b (40%) share of the NT$7.1b contract. Delivery is expected to begin from May. General market expectation is that Ambit's gross margin on the deal will be below 10%.

• We believe shipment will last for 18 months and anticipate that Ambit will secure a reasonable price on the chips used in ADSL modems, as Alcatel will be the supplier. Chip price uncertainty is a potential risk, however.

• Overall, we see the Chunghwa contract as good news for Ambit, despite the fact that profit margin will be low. The contract enhances Ambit’s position as a candidate for further similar contracts from other telecom providers.

• This is reportedly the last time Chunghwa will source ADSL equipment through auction. In future it will purchase from existing suppliers.

BennyLo@Primasia.com +886-[0]2-2547-8869