Standard & Poor's cuts Quanta's outlook rating

Quanta Computer Inc (廣達電腦), the world's biggest maker of notebook computers, had its outlook rating cut to stable from positive by Standard & Poor's, which cited severe pricing pressure and fierce competition.

Quanta has failed to increase earnings in proportion to its revenue growth over the past three years, due to "severe pricing pressure, intense market competition, and the lack of a diverse product range," Raymond Hsu and John Bailey said in the report today. S&P affirmed its BBB- rating, the lowest investment grade, on Taoyuan, Taiwan-based Quanta's corporate credit and senior unsecured convertible bond.

The challenges facing the company "are expected to remain over the next few quarters," the report said. "S&P does not believe that the rating on the company will be revised upwards" over the medium term.

Growth in worldwide PC shipments is expected to slow to about 10 percent this year from 15 percent last year, industry researcher IDC said in a Jan. 18 report. Mounting competition has hurt profit at Taiwan computer makers such as Quanta and smaller rival Compal Electronics Inc (仁寶電腦). The nation makes two out of three notebook computers made globally.

Quanta, which makes notebook computers for Dell Inc and Hewlett-Packard Co, had an 18 percent drop in last year's third-quarter profit from a year earlier. Its sales fell 3.4 percent in the same period. Its third-quarter gross margin was trimmed to 4.7 percent from 6.6 percent a year earlier. The computer maker on March 16 said it plans to start making auto electronics products in the second half, expanding its product line as growth in the personal computer market slows.

Compal, the world's second-largest notebook computer maker, on March 22 reported its fourth straight decline in quarterly profit.