Compal to integrate computer, electronic technology

Compal Electronics Inc (仁寶), the world's second-largest contract laptop computer maker, expects to buy into local networking equipment and electronic-components manufacturers in the first half of the year to seek integration of technology and access to new markets, the company's chairman said yesterday.

Opposite to its past self-supporting expansion strategies, Compal aims at pushing forward mergers and acquisitions (M&A) this year to further drive up revenue and expand company size, said chairman Rock Hsu (許勝雄) said.

Hsu did not deny market speculation that the major networking equipment maker Accton Technology Corp (智邦科技) is on the short list. Accton reported earlier this week that its pre-audited net sales for last month dropped 35.91 percent year-on-year to NT$1.23 billion (US$40 million). Sixty percent of its March sales came from switches and 19 percent from broadband and gateway devices.

Analysts praised this move, as it may help Compal brace for the major trend of 3C integration -- computer, communication and consumer electronics -- and snatch a larger market share.

"Compal has been a market leader in manufacturing notebooks but its capability in consumer electronics is relatively weak," said Steven Tseng (曾緒良), chief analyst on downstream electronics at Yuanta Core Pacific Securities (元大京華證券).

"If its merger target is Accton, its move in this direction makes perfect sense, considering the aggressive moves made by Hon Hai Precision Industry Co (鴻海精密) in recent years," he added.

Hon Hai, the nation's biggest electronics company by sales, acquired Ambit Microsystems Corp (國電) in late 2003, which makes routers, modems and other networking equipment.

In February, Hon Hai announced the merger of AnTec Electric System Corp (安泰電業), a supplier of automobile wires.

Tony Tseng (曾省吾), vice president at Merrill Lynch Taiwan Ltd, said M&A is an industrial trend and a path companies can choose when they reach a bottleneck or face stiff challenges.

"Expanding into wireless communications is an important step for Compal in expanding its turf," he said at the Taipei International Electronics Spring Show, which started yesterday and will last until Monday, and is held at the Taipei World Trade Center Exhibition Hall I.

According to government statistics, the nation's electronics sector created export outputs worth US$88.62 billon last year, nearly 50 percent of Taiwan's total exports.