Quanta wins new OEM order

Shares in Quanta Computer Inc (廣達) rose limit-up yesterday after a local newspaper reported that Fujitsu Siemens Computers would outsource its new notebook computer orders to Quanta.

The stock also benefited from the falling price of thin film transistor liquid crystal displays, a major and previously expensive notebook computer component, and the depreciating New Taiwan dollar, analysts said. Quanta's profit margins would increase as a result.

Quanta's stock rose 6.97 percent yesterday to NT$107.50. That's up nearly 17 percent on the fifty-two week low of NT$92 the company touched in trading last Friday.

"The order from Fujitsu Siemens will be very helpful towards Quanta's goal of producing four to 4.5 million notebook computers next year," said Hsu Wei-che, an analyst at Taiyu Securities Co. Last month, Taiwan's largest notebook computer maker said that next year it expected to produce 50 percent more notebook computers than this year. The company is anticipating production of at least 3 million computers this year.

According to the report in yesterday's Commercial Times, a financial daily, Netherlands-based Fujitsu Siemens is to outsource its new generation notebook computers to Quanta, and gradually discontinue its long-term original equipment manufacturer relationship with local notebook maker Compal (仁寶電腦). Shipments from Quanta will begin from February or March next year, with monthly orders of about 20,000 units, the newspaper report said, without citing sources.

Quanta would not confirm the report, but nor would it deny it. "We have a very good cooperative relationship with Fujitsu Siemens," said an official at Quanta.

Jointly owned by Fujitsu Ltd and Siemens AG, Fujitsu Siemens' products range from notebook computers to work stations and data center solutions.

"We hope in the future they will give us more orders, but I can't say how big the order might be out of respect for the client," the official at Quanta said.

Taiyu Securities' Hsu said the company won't give any more details until after the contract is signed.

Quanta is currently a major original equipment manufacturer of notebook computers for IBM, Compaq, Dell, Apple, Hewlett-Packard, and Gateway.

Vincent Chen, an analyst at First Securities Consulting, said that the order would provide a boost to next year's revenue, but the effect on the company's profit margin would be minor. Taiyu Securities' Hsu said the order would contribute a maximum of NT$0.5 to Quanta's earnings per share next year.

Before news of the possible order from Fujitsu Siemens, analysts had estimated that the company would post earnings per share in 2001 of about NT$6.8. The figure is higher than the NT$5.5 expected this year, but 15 percent lower than last year's earnings per share of NT$8.02.

That's because the company has been suffering from diminishing profit margins from the sales of its notebooks on an OEM basis.

The recent fall in the price of TFT-LCD panels is therefore likely to have a more positive effect on Quanta's profit margin than the Fujitsu Siemens deal, said Vincent Chen.

"A third of the cost structure for a notebook comes from the panel," said Chen. "We can see the TFT-LCD panels' price reducing very fast," he said.

According to local media reports, the decision by major TFT LCD manufacturers in South Korea, Japan, and Taiwan to increase production has lowered the price of large-sized panels dramatically throughout the year, and especially in October.