MStar Semiconductor is likely to post an EPS higher than that of fellow company MediaTek for the first quarter of 2011, according to industry sources.

MStar's earnings for the fourth quarter of 2010 translated into a net EPS of NT$3.50 (US$0.12), while MediaTek registered NT$3.52. MediaTek's quarterly EPS has slid since the first quarter of 2010, when it registered NT$10.29.

MediaTek's gross margin is expected to drop to 45-47% in the first quarter from 49.2% in fourth-quarter 2010, judging from the company's revenue performance, the sources said. MStar, however, may be able to meet its target of flat to slight growth, the sources indicated.

MediaTek saw revenues decrease 12.4% on quarter to NT$19.86 billion in the first quarter. MStar, however, had a 0.1% increase sequentially during the same period.

MStar previously estimated that first-quarter revenues would grow 0-6% sequential in the first quarter with a 41-43% gross margin. The company reported NT$8.2 billion in revenues for the fourth quarter of 2010, with a gross margin of 41.2%.

Price competition from China-based rivals in the 2.5G segment may continue to negatively affect MediaTek's profitability in the second quarter, the sources said. Though MediaTek's revenues will likely enjoy double-digit revenue growth sequentially in the second quarter, gross margin may only see flat growth, the sources estimated.

MediaTek has not provided its guidance for the second quarter.