Fri, Feb 24, 2006 - Page 10 News List

Compal expects strong notebook shipments

ROARING AHEAD The company expects shipments to expand by more than 50 percent this year, boosted partly by the introduction of the new Napa platform

By Jason Tan  /  STAFF REPORTER

Compal Electronics Inc (仁寶電腦), the world's second-largest contract notebook computer maker, is aiming to achieve 50 percent growth in its notebook shipments this year, a company executive said yesterday.

Shipments for this year are expected to hit 15 million units, up from around 9.8 million units last year, the firm said, representing more than 50 percent growth.

This level would exceed the International Data Corp's (IDC) forecast of 21 percent growth in average shipments globally for laptops, to 78 million units this year.

Growth drivers

"The new Napa mobile-technology platform and upcoming [release of the] Microsoft operating system will accelerate overall notebook demand this year," Ray Chen (陳瑞聰), president and chief executive officer of Compal, told investors yesterday.

First quarter

Looking forward, Chen said that first-quarter notebook shipments will report similar volumes to the fourth quarter of last year.

In addition to notebooks, Compal's product mix also includes liquid-crystal-display (LCD) monitors and LCD TVs.

Chen yesterday said the firm expects a 10 percent decline in shipments of its LCD monitors, as well as a 15 percent to 20 percent drop for LCD TVs, on seasonal factors and oversupply.

Revenues and margins in the first three months of the year are expected to decline slightly, after Compal spun off its handset division to Compal Communications Inc (華寶通訊). The deal took effect on Jan. 1.

The handset division produces Pocket PCs and mobile phones, which offer higher margins than notebooks.

No slow season?

The outlook for the second quarter -- which traditionally is a slow period -- looks set to be rosier than the first, with notebook volumes projected to grow by 15 percent, according to Chen.

New models coming into production as well as demand for Napa-based notebooks will drive the growth, he said.

However, Compal said the higher notebook shipments will not boost its margins significantly in the near term.

Squeezed margins

"The fight for larger market share will create a `bloody' competition. Maintaining current margins has become a thorny issue for the nation's computer makers," Chen said.

Compal reported gross margin of 6 percent last year, down slightly from 6.2 percent the previous year, according to its latest financial results.

Net income grew 28 percent year-over-year to NT$8.42 billion last year, translating into earnings per share of NT$2.43, from NT$6.57 billion, or NT$1.95 a share, in 2004.

One analyst foresaw few surprises ahead for Compal, unless subsidiaries such as Toppoly Optoelectronics Corp (統寶光電) or Vibo Telecom Inc (威寶電信) report strong profitability.

In addition, when the incorporation of fancier and richer applications, such as TV, into portable computers occurs, this will push up global notebook sales tremendously, said an assistant portfolio manager at Nan Shan Life Insurance Co (南山人壽), on condition of anonymity.

Costly components

"The average selling price of notebooks has gone up because of the Napa platform, but higher component costs have also eaten into computer makers' margins," he said.

As smaller rivals such as Inventec Co (英業達) and Wistron Inc (緯創) have also set high shipment targets this year, this will intensify competition in the contract manufacturing business, he said.

He estimated per share earnings of NT$2.8 to NT$2.9 for Compal this year.

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