CNTF rumor

A rumor was spreading among Chinese media web sites, it said that TechFaith(CNTF) is providing design service to some unlicensed vendors which sells black market phones. Some marketing people from Techfaith denied the rumor.Given the Company is going to report Q405 earnings just after the market closes today, it is hard to make a decision on this rumor.

If the rumor is true, I believe the market will sell off to some extent, many people trade on news. But I am more concerned with the general business operation and its outlook for this year, which I think should not be bad. 2005 had been a very hard year for most Chinese cell phone manufacturers, many expect 2006 and beyond will present opportunities as these local vendors learned from their mistakes and shape up their product quality and marketing efforts. As the biggest technology and design solution provider, I think Techfaith will see more opportunities in domestic market. On the international side, in the long run they can gain contracts from overseas vendors because of their low cost advantage. Thus, if the rumor is confirmed and market sells off, it may be another very good opportunity to pick up more shares.

On the other hand, most rumors are not true. If that is the case, then what really matters is how strong the business itself.

I am long CNTF.