Compal hit hard by lag in orders

Compal Communications Inc (華寶通訊) shares hit a record low yesterday, from its debut last December, on growing concerns that the local contract handset maker may miss its shipment target for 2004 due to a possible loss of orders.

Compal fell 5.65 percent to NT$58.5 on the TAIEX, which represents a 31-percent slide from the June 1 closing price of NT$85.

The decline came as speculation mounted on the equity market that Compal could see a setback in orders from an important client, Motorola Inc, as the US handset vendor plans to extend its partnership with BenQ Corp (明基電通).

Compal, the handset manufacturing arm of Taiwan's No.2 laptop computer contract maker, Compal Electronics Inc (仁寶電腦), currently supplies its mobile phones mostly to Motorola and Alcatel SA.

Motorola's involvement with BenQ could put Compal in an unfavorable situation as the company was expected to ship a large volume of a new low-end model for Motorola in July to replace the old C200 model produced by BenQ, said Stevie Chou (周奇賢), an analyst at SinoPac Securities Corp (建華證券).

"But, Compal is likely to lag behind the schedule. Sources from the handset maker's component suppliers said they haven't yet received anticipated orders, which should have arrived before June, for the Motorola model," Chou said.

Lin Chin-tung (林欽棟), a spokesman for Compal's major cellphone-shell supplier, Taiwan Green Point Enterprises Co (綠點), said: "We have seen some delay; the volume for June has fallen short of our previous expectations."

In light of the shipment delay, Chou conservatively forecast that Compal will only ship 6.9 million mobile phones this year, 8 percent lower than the company's projection of 7.5 million units.

Rival BenQ said its handset shipments will surge to 16 million this year from 13 million in 2003, including its own brand-name models.

Calling speculation untrue, Compal spokesman Dennis Ko (柯典明) said "We're on schedule. We believe the orders for Compal will not be squeezed, even if Motorola extends manufacturing ties with BenQ."

"We're also confident in hitting the shipment target. Though we only shipped 650,000 units in the first quarter, output will shoot up beginning in the second half," Ko said.

Monthly is expected to soar to one million units in September, or October, he added.

Ko's came after Citigroup sharply lowered Compal's 2004 earnings forecast to NT$1.7 billion and cut shipments projection to 7 million units in its latest report.

But, not all industry watchers are pessimistic about Compal's outlook.

Roland Wee (李健仁), an analyst with ABN AMRO Asia Limited Taiwan, said he will stick to its projection that Compal will earn NT$2.5 billion this year with at least 8 million handsets shipped.

In late April, Compal forecast that 2004 earnings will fall to about NT$1.7 billion, which is about 10-percent drop from NT$1.88 billion earned in 2003.