BenQ's sales slump in third quarter

BenQ Corp (明基電通), the nation's largest maker of mobile phones, LCD monitors and data-storage products, said yesterday that its net sales in the third quarter fell 15 percent from the previous quarter.

"With slow demand in the third quarter, our handsets, LCD monitors and storage products, such as CD-ROMs and DVD-ROMs, all reported decreased production," said Alex Liou (劉維宇), chief financial officer for BenQ.

Between April and June, BenQ posted NT$22.61 billion in sales, a 15-percent drop from previous quarter's NT$26.65 billion, with NT$1.4 billion in net income, a 42 percent decline from the second quarter, it said.

BenQ, which owns about 15 percent of AU Optronics Corp (友達光電), Taiwan's largest maker of flat panels, said annual profit will fall NT$1.2 billion this year, mainly because investment income from AU declined, Liou said. The company in April forecasted its annual profit at NT$8.99 billion for the year.

AU Optronics made NT$870 million in profit in the third quarter, down almost 78 percent on the second quarter. Last week the company revised its annual net income forecast from NT$14.6 billion to NT$6 billion, citing cut-throat competition in the flat-panel industry.

BenQ's gross profit margin, nevertheless, rose 1.1 percent quarter-on-quarter to 16.2 percent.

"Increased shipments of our own-brand products and greater revenue from higher margin ODM products boosted our profit margin despite the price war among retailers," Liou said.

The CFO anticipates rising sales.

"We expect fourth-quarter sales to grow by around 15 percent [over the third quarter]," Liou said.

BenQ shares traded unchanged yesterday to close at NT$48.3 per share on the TAIEX.

An analyst said the company's target is realistic.

"Banking on a boost from holiday shopping, BenQ's handset and LCD-monitor shipments are set to soar," said Benny Lo (盧志恆), an analyst at Primasia Securities in Taipei.

The company is expected to ship 4 million handsets in the fourth quarter and 15 million units for the full year, Irwin Chen (陳盛穩), a vice president at BenQ, said.

BenQ is major manufacturing partner for Motorola Inc, with more than 80 percent of its shipment going to the US-based high-tech giant.

Fourt quarter LCD-monitor production is also expected to rise 40 percent over the third quarter, Liou said, reasoning that price cuts in LCD panel and LCD monitor markets will boost demand.

Another analyst, however, was skeptical about the company's fourth quarter revenue projections.

"Buyers know that LCD-panel prices will continue to decline," Lin Min-nung (林民農), an analyst at Yuanta Core Pacific Securities Corp (元大京華證券), said. "As a result, they may delay their purchases until later next year."

In terms of handsets, Lin said that BenQ is only making low-profit products.

"The C300 handset that BenQ makes for Motorola is a black-and-white model," he said. "But it's the color-screen handsets that result in higher profit margins."