Print

Mail

wiki links

Outsourcing could boost Arima Communication

Arima Communication Corp (華冠通訊), the nation's No. 2 cellphone maker, said yesterday it expects its shipments to climb some 20 percent this year riding on the growing outsourcing trend by international handset vendors on cost saving.

Arima, which primarily supplies Sony Ericsson Mobile Communications AB and NEC Electronics Corp with low- and middle-range handsets, expects handset shipments to grow to around 12 million units this year from 10 million last year.

In contrast to the rapid growth in shipments, the gross margin is likely to drop to around 9.5 percent this year from 11 percent last year due to the slow increase in demand for high-end models, said Howard Huang (黃厚銘), a vice president of Arima's finance department.

"We don't expect the decline will be as drastic as in the Taiwanese computer sector," Arima president Owen Chen (陳世惠) told investors during a meeting before the company's initial public offering.

Arima Communication Corp, the cellphone-manufacturing arm of notebook-computer maker Arima Computer Corp (華宇), is scheduled to debut its 19.2 million common shares on the TAIEX on July 1, at NT$45 per share.

With international handset brands farming out production to safeguard their market position, the four-year-old Arima aims to boost its global market share to 6 percent in the next two to three years from 2 percent now, Chen said.

The growth in shipments is expected to push revenues up to NT$40.9 billion, about 37 percent more than last year's NT$29.9 billion, a spokesman said. Earnings are expected to increase at a slower pace of 20 percent to NT$12.6 billion from NT$10.4 billion last year.

"The initial price of NT$45 could spoil investors' appetite, because of its lukewarm profitability," said Stevie Chou (周奇賢), an analyst with SinoPac Securities Corp (建華證券).

"Our major concern is the slim gross margin, which will give scant room for the company to grow further in 2004 and 2005," Chou said.

Arima's projected gross margin of under 10 percent is much lower than the 20.5 percent reported by smaller rival Compal Communications Inc (華寶通訊) last year. Compal shares fell 2.03 percent, or NT$1.5, to NT$72.5 on the TAIEX yesterday. In the first quarter of this year, Compal earned NT$1.05 per share, while Arima only made NT$0.88 during the same period.

Rahul Shukla, a technology investment banking director of the Citi Group in Hong Kong, however, rated Arima highly, saying the Taiwanese company should be able to maintain its gross margin due to its component expertise, especially in the color displays.

"Of course I'll recommend these shares to investors," Shukla said.

Fubon Securities Investment Services Co (富邦投顧), which helps to underwrite Arima's shares, forecast that Arima will earn NT$4.31 a share this year on revenues of NT$23.12 billion, up 53.65 percent.
This story has been viewed 2453 times.