Sat, Nov 01, 2003 - Page 11 News List

Hon Hai's profit leaps 51 percent

DEMAND RISESThe company saw increased output at its personal-computer and consumer-electronics factories in China, which upped net income to NT$6.2 billion

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Hon Hai Precision Industry Co (鴻海精密), Taiwan's largest company by sales, had a 51 percent increase in third-quarter profit as demand rose at its personal-computer and consumer-electronics factories in China.

Net income rose to NT$6.2 billion (US$182.7 million) in the three months ended Sept. 30, from NT$4.1 billion a year earlier.

The Taipei-based company has gained market share from Flextronics International Ltd, the world's biggest maker of electronics for other companies, and No. 2 Solectron Corp.

"We were pleased with the results," said Kurt Spieler, who counts Hon Hai shares among the US$2.8 billion in equities he helps manage for Principal Global Investors in Des Moines, Iowa.

"The company continues to gain market share," he said.

Hon Hai makes PlayStation 2 video-game consoles for Tokyo-based Sony Corp, the world's second-biggest consumer-electronics maker, and computers for Hewlett-Packard Co, the No. 2 PC maker.

Sony said in March it would move production of PlayStation 2 to factories in China run by Hon Hai and Asustek Computer Inc (華碩電腦) to reduce costs as competition from Microsoft Corp's Xbox game console forces the company to lower prices.

Hewlett-Packard has also cut prices. The company said in August it had been "overly aggressive" with discounts to compete with No. 1 Dell Inc, after reporting a loss at its PC division.

Third-quarter earnings were in line with estimates of five analysts surveyed by Bloomberg. For the first nine months, Hon Hai said profit rose by a third to NT$16.3 billion, or NT$6.47 per share, from NT$12.2 billion, or NT$5.89, a year earlier. Sales increased 34 percent to NT$220.1 billion from NT$164.6 billion.

Hon Hai will probably overtake Sanmina-SCI Corp and Celestica Inc to become the world's third-largest maker of electronics for other companies this year or next, according to Ben Lee, an analyst with Nomura Securities in Taipei.

"Hon Hai's strength is in making components," Lee said.

"Even Flextronics and Solectron have to buy components from Hon Hai."

The Taiwanese company has been taking business away from larger rivals by convincing clients such as Sony to give orders directly to Hon Hai, Lee said.

In the first nine months, Hon Hai had the equivalent of US$6.5 billion in sales, surpassing Toronto, Canada-based Celestica with US$4.8 billion. Singapore-based Flextronics had sales of US$9.7 billion in its most recent nine-month period, followed by US$8.4 billion for Milpitas, California-based Solectron.

The company is diversifying, taking a stake in a NT$10 billion flat-panel display venture that will be 50 percent owned by Hon Hai chairman Terry Kuo (郭台銘).

Kuo sold some of his shares in Hon Hai to buy a stake in the venture, Innolux Display Corp, which will make screens for wall-mounted televisions and other products.

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