Hon Hai's sales rise 43%

The shares of Hon Hai Precision Industry Co (鴻海精密) rose after the nation's biggest electronics company by sales had a better-than-expected 41 percent gain in second-quarter profit. The shares rose 2.8 percent to NT$111.50 on the TAIEX.

Net income was NT$7.6 billion (US$222 million), compared with NT$5.4 billion a year earlier. Sales rose 43 percent to NT$87.6 billion.

"Hon Hai had good sales growth," said George Wu (吳裕良), a fund manager with Invesco Taiwan Ltd (景順投信). The company expanded its product line without hurting profit as much as expected, he said.

Hon Hai has started making motherboards, which connect the parts in personal computers, and has won orders from Intel Corp, which has handed off most of its board business to Hon Hai, Wu said.

Hon Hai, led by Chairman Terry Gou (郭台銘), is gaining market share as a manufacturer for Dell Inc, the world's largest personal computer maker, and Cisco Systems Inc, the world's largest computer-networking equipment maker, according to analysts. Hon Hai makes electronic parts, unlike rivals such as Solectron Corp that are just assemblers, they said.

"Hon Hai will still be able to fuel strong growth," said Roland Wee (李健仁), an analyst with ABN Amro Asia Ltd in Taipei. ``The company has made some pretty intelligent acquisitions.''

Wee said Hon Hai may overtake Singapore-based Flextronics International Ltd this year as the world's leading maker of electronics for other companies, after buying Ambit Microsystems Corp (國電). Hon Hai has increased profit while rivals such as Solectron have posted years of losses.

Hon Hai bought Ambit, which makes parts for telecommunications equipment, for NT$36.7 billion last year.

Gou, 53, last month reiterated his plans to retire in about four years. Gou is Taiwan's richest man, with assets of US$2.8 billion, according to Forbes magazine. Gou will install ``professional management'' to run the company, he said in an interview.

The founder of Hon Hai built his fortune after starting the company in 1974 with an investment of NT$300,000 to make plastic knobs for television sets.

Hon Hai's return on equity, a measure of how well the company invests income to make more profit, rose to a five-year record of 29 percent in 2003.

Gou last month created a fund worth about NT$9.5 billion so that dividends can be used for employee bonuses.

Gou started the trust fund with 80 million of his shares in the company to avoid share dilution caused by distributing stock bonuses to employees, company spokesman Edmund Ding (丁祁安) said. The company decided to end profit-sharing this year for its non-executive directors and will reduce distribution of stock bonuses for other workers.