Compal Electronics Inc (仁寶電腦), the world's second-largest maker of notebook computers, yesterday saw its share prices limit-down 7 percent to NT$29.30 after reporting dismal first-half earnings on Thursday.
While the company reported a lower-than-expected first-half earnings per share of NT$0.99, Compal said it can achieve its full-year shipment forecast of 8 million notebooks, as clients such as Hewlett-Packard Co increase their orders.
The Taiwanese company had cut its forecast to 7.5 million units on weaker demand, Compal President Ray Chen (陳瑞聰) told investors on Thursday.
Chen's comment was the "worst-case scenario" and the original forecast is "very attainable," because overseas orders are still rising, Compal Chief Financial Officer Gary Lu (呂清雄) said in a phone interview.
The company shipped 3.2 million notebook computers in the first half of this year and aims to ship "at least" 2 million units in the third quarter and 2.3 million in the fourth, Lu said. Compal traditionally generates 60 percent of its full-year sales in the second half, he said.
"Our first-half sales showed demand was strong," Lu said. "The profit declined disproportionately because production costs increased."
Compal's first-half profit fell by a third to NT$3.4 billion even as sales rose 50 percent to NT$92 billion.
US clients such as Hewlett-Packard are ordering more "complete" notebooks, fitted with "add-ons" such as DVD players and memory chips, for direct shipment from Taiwan to retail customers in a bid to lower their inventory costs and last-mile assembling, Lu said.
While this increases Compal's revenue, profit declines because the company has to spend more on inventory and production, he said.
Compal's gross margin, or the percentage of sales left after production costs, fell to 6.4 percent in the second quarter from 7.1 percent in the first and may fall by half of a percentage point in the third quarter, Chen said on Thursday.
Lu said Chen had given a "more conservative" forecast amid Intel Corp's decision to delay for quality concerns its newest chips that allow laptop computers to connect wirelessly to the Internet to early 2005 from the second half this year, Lu said.
Santa Clara, California-based Intel last month said it will delay its so-called Sonoma laptop computer chips, a decision which comes after the company booked a US$38 million charge because some of its Grantsdale chipsets malfunctioned and had to be replaced.
China's decision to slow its economy and the US Federal Reserve's two interest-rate increases also contributed to Chen's more moderate shipment forecast, Lu said.
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