Fri, Jun 09, 2006 - Page 11 News List

Asustek says sales falling

CLEARING STOCK The world's biggest motherboard manufacturer was adversely affected by increased competition ahead of new environmental regulations

BLOOMBERG

Asustek Computer Inc (華碩電腦), the world's largest maker of boards which connect electronic parts in computers, said second-quarter sales will be "10 to 15 percent" lower than the previous three months because of reduced prices.

For the quarter ended March 31, sales rose 15 percent to NT$92.6 billion (US$2.9 billion) on a consolidated basis from a year earlier, according to the company.

Revenue typically slows in the second quarter after the year-end shopping period.

Asustek's motherboards were used in about one-third of all computers last year, according to the company.

Asustek and other motherboard makers including Micro-Star International Co (微星科技) and Elitegroup Computer Systems Co (精英電腦) are trying to get rid of inventory ahead of new European environmental regulations, which begin on July 1. New semiconductors from Intel Corp, the world's biggest chipmaker, may spur demand for computers later in the year.

The regulations "made prices fall much, much lower because everybody wants to clear stock at the same time," Sunny Han (韓德行), marketing director of Asustek, said yesterday. "The buyer has enough space to bargain on the price."

Shipments of motherboards will rise 20 percent in the third quarter, compared with Asustek's average gain of 10 percent to 15 percent for that period in previous years, due to cheaper computer prices and back-to-school demand, Han said.

Motherboards accounted for 23 percent of the company's sales last year, while notebook computers contributed 31 percent.

Asustek shares fell 2.5 percent to NT$69, the lowest since Dec. 1, 2004. The stock has declined 32 percent this year, compared with a 3.3 percent drop in the benchmark TAIEX.

Global sales of laptop computers will rise more than 20 percent this year, while desktop PC sales will gain "nine to 10 percent," Han said.

"People in emerging markets will use their money to buy a PC for education," Han said. "In Europe, people will buy a notebook or a second notebook for their personal use."

New processors being released this month by Intel and price cuts next month on older processors from Intel and Advanced Micro Devices (AMD) Inc are expected to spur demand, Han said.

Intel will begin selling its faster types of processors this month, with the Woodcrest chip for computer servers being introduced first, the Conroe version for desktops next month and the Merom semiconductor for notebooks in August.

The new Intel processors threaten recent AMD market share gains for processors used in desktop computers.

"From the second half, we believe Intel's product can stimulate market demand," Han said.

Both chipmakers said this week at Taiwan's Computex trade show that they expect to gain market share by the end of the year.

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