Report on Motorola sends shares of Compal plummeting

Shares of Compal Communica-tions Inc (華寶通訊) yesterday tumbled by the 7 percent daily limit on speculation that the nation's biggest mobile phone maker will lose orders from its main customer Motorola Inc.

Compal Communications, which replaced BenQ Corp (明基) as Motorola's biggest handset supplier about two years ago, gets 90 percent of its revenues from handsets made for the world's second-largest mobile phone vendor.

"To further lower handset prices to gain a bigger market share, Motorola is seeking a collaboration with electronics manufacturing service providers such as Foxconn International Holdings Ltd (富士康控股) to manufacture handsets," said Helen Chen (陳佩君), who tracks the mobile phone industry for Polaris Securities Co (寶來證券), citing reliable sources.

Foxconn International, listed in Hong Kong, is a handset manufacturing unit of Taiwan's biggest electronics component maker Hon Hai Precision Industry Co (鴻海精密).

Motorola's change in strategy will cause a decline in revenues and shipments for Compal Communications next year, Chen forecast. She projected the company would ship around 72 million phones this year.

Compal Communications shares closed at NT$117.5 (US$3.58) on the Taiwan Stock Exchange after local Chinese-language newspaper Commercial Times reported that Motorola planned to unveil low-priced phones developed by the company by the end of the year.

"The report is groundless and is totally market speculation," said Compal Communications spokesman Dennis Ko (柯典明) in a statement released yesterday.

Compal Communications, an important original design manufacturing partner of Motorola, is shipping phones to Motorola now and developing and shipping new models, which Motorola plans to unveil next year, Ko said.

To bolster the stock price, the company decided yesterday to buy back 10 million shares during the period between today and Sept. 17 at prices ranging from NT$82.5 to NT$218.5 per share.