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Nokia woes may lift Acer

Nokia Oyj's move to cut its sales forecast for a third time this year sent its stock tumbling more than a fifth and shares of Acer Comm-unications & Multimedia Inc (明電), a mobile phone maker, as much as 2.8 percent higher.

What's bad news for Nokia may turn out to be a boon for Taiwan's mobile phone component and handset makers, said Tony Tseng, analyst at Merrill Lynch Taiwan Ltd.

That's because once demand starts to pick up for Nokia's handsets, it and rivals may prefer to test the recovery by farming out production to the likes of Acer Communications.

The slowdown "will force vendors such as Nokia to think about outsourcing," said Merrill Lynch's Tseng.

Nokia Oyj, Motorola Inc and Ericsson AB "have limited engineering resources and will probably want to allocate them to developing the next generation phones or infrastructure such as base stations."

Tseng, who's been following Acer Communications for three years, has an "accumulate" rating on the stock. He expects the company's earnings per share to rise 64 percent next year to NT$4.11 from an estimated NT$2.50 this year. Acer Communications shares rose NT$0.42, or 1.3 percent, to NT$33.30.

Taiwan parts makers already have a relationship with Nokia.

The Finnish telecommunications company gets printed circuit boards from Compeq Manu-facturing Ltd (華通電子) and keypads from Ichia Technologies Inc.

As for Motorola, the second-biggest mobile phone maker orders handsets from Acer Communications as well as DBTEL Inc (大霸電子) and Compal Electronics Inc (仁寶電腦).

Ericsson, meanwhile, is farming out mobile phone production to GVC Corp (致福). and Arima Computer Corp (華宇電腦).

To be sure, Acer Communications is unlikely to start seeing orders right away. Tseng says should Nokia outsource some of its mobile phone handset production, it's unlikely to place any orders this year.

The company would also need time to coordinate with another on manufacturing.

Nokia said yesterday it expects earnings per share of 0.15 euro to 0.17 euro in the second-quarter, down from an earlier prediction of 0.20 euro. In April, Ericsson posted its first quarterly loss from operations in nine years and said it's farming out production to cut costs.

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