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Hon Hai profits increase 43 percent on IPod sales

Hon Hai Precision Industry Co (鴻海精密), which manufactures Apple Computer Inc's iPod, said profit gained 43 percent in the second quarter on rising demand for music players and mobile phones.

Net income climbed to NT$12.8 billion (US$388 million), compared with NT$8.9 billion a year earlier.

Hon Hai, founded by Terry Gou (郭台銘), Taiwan's second-richest person, is also boosting earnings by supplying parts for Motorola Inc's Razr phone and Sony Corp's PlayStation consoles. Foxconn Technology Group (鴻準精密), controlled by Hon Hai, is a key supplier of iPods, according to Apple.

Electronics and related products make up a third of Taiwan's exports.

"Hon Hai was able to maintain solid sales growth by riding on its clients' successes," Kirk Yang, a Hong Kong-based analyst at Citigroup Inc, said before the announcement.

Yang has a "buy" rating on the company's shares.

Sales increased 30 percent to NT$185 billion in the second quarter from NT$142.7 billion. Company spokesman Edmund Ding declined to confirm the derived results.

Net income climbed 40 percent to NT$22.8 billion in the first half from a year earlier. Sales expanded 30 percent to NT$359.5 billion.

Shares of Hon Hai, which reported earnings after the 1:30pm trading close, rose 0.5 percent to NT$185.50 in Taipei. The stock has advanced 24 percent this year, outpacing a 1 percent gain in the benchmark TAIEX index.

Net profit margin, or income divided by sales, widened to 6.3 percent in the first half from 5.9 percent a year earlier.

"Hon Hai maintains solid growth by having top electronic brand names among its clients," said Phil Chen, who manages US$154 million, including Hon Hai shares, at Grand Cathay Securities Investment Trust Co (大華投信) in Taipei.

Hon Hai on Aug. 18 said it will hire more workers and build dormitories in China after Apple found labor practices at one of the Taiwanese company's factories violated a code of conduct.

The investigation "raised concern Apple could turn to other suppliers to avoid criticisms," Chen said.

Hon Hai's Gou started the company in 1974 with NT$300,000 to make plastic knobs for television sets. He went into business after graduating from the China College of Marine Technology and Commerce in Taipei.

Gou now has a net worth of US$4.3 billion, according to Forbes magazine.

Worldwide handset sales may climb 22 percent to 1 billion units this year, research firm Strategy Analytics said in July.

Motorola, the world's second-largest maker of mobile phones, raised mobile-phone shipments by 53 percent in the second quarter to a record 51.9 million.

Hong Kong-listed Foxconn International Holdings Ltd (富士康控股), the mobile-phone making unit of Hon Hai, counts Nokia Oyj, the world's largest handset maker, Motorola and Sony Ericsson Mobile Communications Ltd among its customers. Hon Hai supplies parts to Foxconn International.

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