Thu, Jun 08, 2006 - Page 11 News List

AUO trims forecasts and dashes World Cup hopes

GREAT EXPECTATIONS The company said shipments may grow more slowly than expected, suggesting that panel makers may have overestimated World Cup sales

BLOOMBERG

AU Optronics Corp (AUO, 友達光電), the world's third-largest maker of liquid-crystal displays (LCDs), cut shipment forecasts, spurring concern that sales of televisions to view soccer's World Cup may miss expectations. Shares of flat-panel makers slumped.

Second-quarter shipments of TV panels will rise less than 10 percent from the previous three months, half its previous growth estimate, the company said late on Tuesday. Prices will decline 10 percent, almost double a projection made seven weeks ago, the company said, without providing a reason.

The revision suggests panel makers may have to further cut prices because they overestimated the increase in TV sales that would be generated by the world's most-watched sporting event.

AU Optronics, Samsung Electronics Co and other LCD makers spent an estimated US$10 billion last year buying equipment to increase capacity before the tournament in Germany, which begins this week.

"The World Cup isn't going to be big enough to resolve the problems in this industry," said Jung Kyun-sik, who helps manage the equivalent of US$1.3 billion at Shinhan BNP Paribas Investment Trust Management Co in Seoul. "For demand to really come alive, prices need to fall more."

The 64 soccer matches at the World Cup will probably draw 30 billion viewers, according to FIFA, soccer's ruling body.

Hsiung Hui (熊暉), an executive vice president at AU Optronics, said that demand for large-sized TV panels failed to meet the company's expectations, as did that for screens used in digital cameras and mobile phones.

"We won't say the World Cup is the single reason for the cut," Hsiung said, in comments relayed by Hsiao Ya-wen (蕭雅文), a company spokeswoman.

JP Morgan Chase & Co analysts Liang-Chun Lin and Bhavin Shah trimmed their forecast for AU Optronics' profit for this year by 21 percent to NT$16.1 billion (US$500 million). They kept a "neutral" rating on the stock.

AU Optronics, which announced its purchase of smaller rival Quanta Display Inc (廣輝電子) two months ago, said on April 20 that second-quarter TV shipments would rise 20 percent from the preceding three-month period and prices would drop about 5 percent.

Last week, Quanta said it cut production of smaller-sized screens last month after discussions with AU Optronics executives "for inventory control." Details on the size of the reduction weren't provided.

AU Optronics reported on Tuesday that sales last month fell 10 percent from April to NT$20.1 billion. The company stuck to its previous forecast for a "high-single digit" percentage gain in computer monitor LCD panel shipments.

"The industry is witnessing a faster and larger-than-expected average selling price decline in all product segments," Hsiung said in a statement.

The percentage drop in second-quarter prices for computer screens will be in the "mid to high teens," compared with a 10 percent decline forecast in April, the company said.

AU Optronics also cut its factory-use projection to about 90 percent of capacity from April's forecast of 95 percent, it said.

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