Compal hurt by component shortage

Shares of Compal Electronics Inc (仁寶電腦), the world's second-largest notebook maker, dropped yesterday after the company announced shipment cuts in the fourth quarter.

Compal's stock fell NT$0.25, or 0.9 percent, to close at NT$29.10 on the Taiwan Stock Exchange, after dropping earlier by as much as 1.5 percent.

The maker posted on Monday a decline in third-quarter profits resulting from losses of reinvestments with TPO Displays Corp and Vibo Telecom Inc (威寶電信).

Due to shortages in batteries, dynamic random access memory (DRAM) chips, liquid-crystal display panels and central processing units, Compal's president and chief executive officer Ray Chen (陳瑞聰) told investors at the time that the company could not fulfill its clients' orders in the fourth quarter.

As such, the company expects to ship only 4.6 million portable computers this quarter, down from the earlier target of 4.8 million to 5 million.

Shipments for the whole year were also slashed to 14 million units, 1 million short from original projections.

"The component shortfall in the fourth quarter will push demand to the first quarter next year. This will help relieve excess inventories to avoid what happened in the first quarter this year," Chen said on Monday.

Compal sees the outlook for next year with optimism, forecasting a total shipment of between 18 million to 18.5 million portable computers.

Chen also said on Monday that Compal is ready to face the challenge from a highly speculative merger between Quanta Computer Inc (廣達電腦), Compal's larger rival, and Hon Hai Precision Industry Co (鴻海精密), the world's largest electronics maker.

Market speculation on the consolidation between the two has fired up recently, but both firms denied the case.

"The merger does not necessarily have to be a very negative thing," Chen said.

He said that if the two industrial heavyweights were to merge -- and thereby combine their finances -- this would definitely create pricing pressure in the market.

But by putting too many eggs in the same basket, those companies will have to source everything -- from components to end products -- from a single maker, he said.

Compal has held various simulations and is able to tackle the challenge if the Quanta-Hon Hai marriage materialized, he said.

Chen also downplayed the possibility of mergers among the top-tier notebook makers, which consist of Inventec Electronics Corp (英業達), Wistron Corp (緯創) and Asustek Computer Inc (華碩電腦).

"Nothing is impossible, but there are no talks among us going on now," he said.