SHANGHAI, China, Feb. 10, 2014 (GLOBE NEWSWIRE) -- Montage Technology Group Limited (Nasdaq:MONT) ("Montage"), a global fabless provider of analog and mixed-signal semiconductor solutions addressing the home entertainment and cloud computing markets, today issued a statement addressing allegations contained in a purported research report issued by a firm that goes by the name of Gravity Research.
In direct response to certain allegations in the report, the company issued the following statements in support of the integrity of its business and financial statements:
Regarding Allegations about the Montage Sales Model:
As evident in Montage's filings with the U.S. Securities and Exchange Commission, revenue from sales through distributors is recognized on a "sell-through" basis, meaning revenue is recognized when delivery is made to Montage's more than 160 end customers worldwide. However, Gravity Research's report ignores this fact and appears to attempt to mislead the reader to incorrectly believe that Montage has a "sell-in" sales model, in which revenue is recognized when sold to the distributor, rather than when actually distributed to an end-customer. This sell-through approach applies to both the company's set-top box manufacturer customers and our memory module manufacturer customers.
Additionally, because a significant amount of our revenue flows through LQW Technology Company Ltd. ("LQW") as well as other distributors to end customers, the due diligence conducted by third parties in connection with the company's initial public offering and recently completed secondary offering process also addressed our relationship with LQW, including an interview with the General Manager of LQW in connection with our initial public offering.
Regarding Allegations about the Montage Revenue Reporting:
Gravity Research additionally alleges: "We do not believe that Montage's claimed revenue is real, and we do not believe that Montage has sufficient scale to be genuinely profitable. We also believe that Montage's business began deteriorating in the past and continued deteriorating to the point at which Management elected to invent LQW and go public on the US market."
To provide additional confirmation of the company's solid financial performance, we have summarized Montage's bank cash balances from the first quarter of 2012 to the third quarter of 2013 in the following table. We have also provided the supporting quarterly bank statements online on the company web site, http://ir.montage-tech.com/releasedetail.cfm?ReleaseID=824337. We plan to make the fourth quarter 2013 cash balance and bank statement available shortly following the filing of the company's Form 10K for 2013. The fourth quarter and year-end financial results are currently scheduled to be reported on February 20, 2014, subject to the anticipated completion of our quarterly and annual review procedures.
The increase in cash balances, as reflected in our bank statements, primarily reflects cash flow from operations, and is consistent with the significant growth in Montage's business over this period of time, as discussed in the company's financial reports and filings with the U.S. Securities and Exchange Commission.
|USD (in $K)||2012-Mar||2012-Jun||2012-Sep||2012-Dec||2013-Mar||2013-Jun||2013-Sep|
|Bank & Cash||15,868||16,448||23,199||21,580||18,007||13,921||41,181|
Note: The September 30, 2013 cash and short-term investments total does not include the proceeds from Montage's initial public offering, which were received on October 2, 2013, as detailed in the company's third quarter results report.
Regarding Allegations about LQW Technology Company Limited:
LQW Technology Company Ltd. is not an affiliate of Montage or its subsidiaries. Mr. Anthony Ho is a seasoned industry veteran with more than 30 years of experience in semiconductor sales and distribution. Mr. Ho was previously Director of Business Development at ASCOMM HK Ltd from July 2003 to February 2006. When Montage first began shipping product in 2005, ASCOMM HK Ltd. was one of our primary distributors, and Mr. Ho the lead account manager. Based on this prior working history, Mr. Ho agreed to form LQW to distribute Montage products. As is common in the industry, LQW also works with Montage's other distributors, but revenue is still not recognized until delivered to an end customer. During Montage's IPO road show, many investors inquired about LQW due to it being our largest distributor. We noted the following points in response to these questions:
1. Montage has contracted with LQW and conducts business with LQW because they are able to offer attractive business terms to Montage such as non-refundable advanced payments for product inventory.
2. Since Montage already directly supports our set-top box end customers with additional software and engineering capabilities, LQW is a good fit to support Montage's logistics requirements.
Regarding Allegations about the History of Shanghai Lanqi Micro-Electronics Technology Company Ltd:
Shanghai Lanqi Micro-Electronics Technology Company Limited (SLMT, in Chinese: 上海澜起微电子科技有限公司, also referenced as "SMMT" in the Gravity Research story.), was formed on December 24, 2008 as a joint venture by Montage Technology (Shanghai) Co. Ltd. (澜起科技（上海）有限公司) – the major operating entity of Montage Technology Group, Limited (Montage) and Mr. Lei Wu (a Chinese citizen) who was the first employee of SLMT.
The purpose of establishing SLMT was to form a 100% domestic entity in order to participate in certain potential government funded projects. However, this effort was not successful at the time.
On July 3, 2009, Montage Technology (Shanghai) transferred its equity interest in SLMT, which was documented in the Industrial and Commercial Bureau of Shanghai Xuhui District and is a matter of public record. A legal opinion was issued by Commerce & Finance Law Offices (a Chinese law firm as only a Chinese law firm can issue Chinese legal opinions in China) confirming that SLMT's 100% ownership was actually and beneficially owned by a third party subsequent to July 3, 2009.
Montage Technology (Shanghai) has not held an ownership interest in SLMT since July 3, 2009, at which time SLMT was no longer an affiliate of Montage Technology (Shanghai). When Gravity Research was working on their story, we believe they must have seen this record but chose to ignore it to mislead the reader.
Montage has established a profitable business model and has taken extensive efforts to proactively and transparently communicate its business structure to investors and analysts. We are fully committed to continuing to build a growing and lasting business. We have been and continue to be available for direct dialogue with any financial market parties who may be interested in Montage, including authors of any third-party research reports. No one from Gravity Research attempted to contact the executive management of Montage at any time.
We have also encouraged and supported investors and analysts in their efforts to communicate directly with Montage's end customers to obtain an accurate and thorough understanding of Montage's business and market position. Montage will defend our business and strongly rebut any false accusations and misleading speculation put forward by parties with a biased agenda, as we believe is the case in the Gravity Research report.
About Montage Technology
Montage Technology is a global fabless provider of analog and mixed-signal semiconductor solutions currently addressing the home entertainment and cloud computing markets. In the home entertainment market, Montage's technology platform enables the company to design highly integrated end-to-end solutions with customized software for set-top boxes. These solutions optimize signal processing performance under demanding operating conditions typically found in emerging marketing environments. In the cloud computing market, Montage offers high performance, low power memory interface solutions that enable memory intensive server applications. Its technology platform approach allows Montage to provide integrated solutions that meet the expanding needs of customers through continuous innovation, efficient design and rapid product development. For more information regarding Montage please visit the company's website at www.montage-tech.com.
This press release contains "forward-looking" statements about the Company's plans, expectations and beliefs, including the expected timing of release of its financial results for the fourth quarter and full year of 2013 and planned responses to any allegations. These forward-looking statements can be identified by terminology such as "will," "should," "expects," "anticipates," "future," "intends," "plans," "projects," "predicts," "believes," "estimates," "forecasts," "may" and similar statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may differ materially from actual results due to a variety of factors including the timing required to complete our quarterly and annual review procedures, changes in circumstances and other potential risks and uncertainties that could cause actual results to differ from the results predicted, as are more fully detailed under the caption "Risk Factors" in our most recent quarterly report on Form 10-Q and other filings with the U.S. Securities and Exchange Commission. Any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events, except as may be required by law.
Mark Voll, CFO
P: 408-982-2780 or 86-21-6128-5678 x8618
Source:Montage Technology Group Limited