Compal Electronics' Q3 net sales rise 8% to NT$55.7bn

Compal Electronics Inc (仁寶電腦), the world's second-largest contract notebook computer maker, posted growth in net sales in the third quarter from the second due to strong notebook shipments, a company official said yesterday.

Its net sales stood at NT$55.7 billion (US$1.6 billion) in the third quarter, an 8 percent growth over the second, while its gross margin dropped slightly to 6.1 percent from the earlier 6.2 percent, according to the company.

"Compal's third-quarter financial performance is pretty much in line with our expectations," said Alvin Kwock (郭彥麟), an associate with J. P. Morgan Securities Taiwan.

Ray Chen (陳瑞聰), president and chief executive officer of Compal, told investors yesterday that the better performance was due to a strong demand for notebook computers, as the shipments reached 2.6 million units in the third quarter, a 28 percent growth year-on-year.

"We are optimistic for the prospects for the fourth quarter and next year," he said.

According to Chen, Compal's notebook shipments in the fourth quarter will expand 8 percent over the previous quarter, and reach 10 million units by the end of the year.

He expects overall notebook shipments will soar to 14 million units next year, as more users switch to the Napa platform, the next-generation Centrino mobile technology from Intel Corp.

Shares of Compal were up NT$0.5 to close at NT$31.4 on the Taiwan Stock Exchange yesterday.

To find ways to increase its stagnant profit margins, Compal might want to continue to control its material and personnel costs, said an analyst who spoke on the condition of anonymity.

This strategy has worked fine so far as Compal managed to exceed market forecasts by surpassing the 6 percent margin mark in the second quarter to 6.2 percent, up from 5.8 percent in the first quarter, he said.

As Compal's product lines -- laptops, personal digital assistants and liquid crystal display TVs -- are established product segments, they might not be able to yield high margins, the analyst said.

However, the company's recent deal to manufacture wireless network equipment for Accton Technology Corp (智邦科技) might help it achieve better profits as this segment offers higher margins.

But the analyst does not expect the effects to kick in next year.

"There is no need to pin high hopes on Compal's margins growth next year as profits from notebooks are just hovering around the 5 to 6 percent level," he said.