Compal Electronics Inc (仁寶電腦), the world's second-largest maker of notebook computers, posted a 2 percent decline in fourth-quarter profit because of provisions for a patent dispute and lower investment income.
Net income at the company fell to NT$2.59 billion (US$79 million), or NT$0.69 a share, from NT$2.63 billion a year earlier, or NT$0.76 a share, the company said in an e-mailed statement.
A fall in notebook computer prices slowed last year as clients such as Dell Inc and Hewlett-Packard Co released products with more functionality. Profit was negatively affected by its investments in a third-generation phone company and a flat-panel maker, and a patent dispute with Samsung Electronics Co.
"We think Compal's poor investment strategy is diluting shareholders' value. And we do not expect that Compal will change this situation anytime soon," Daniel Chang, an analyst at Macquarie Research in Taipei, wrote in a report yesterday.
He rates the shares a "neutral." Sales for the quarter grew 63 percent to NT$103.3 billion.
Gross margin, or the percentage of sales left after deducting the cost of goods sold, declined to 4.7 percent from 6 percent a year earlier and higher than the 4.6 percent in the prior quarter.
"The gains from Compal Communications were offset by losses at Vibo and TPO," Chang Chih-ming (
"Our lawyers also advised we make a provision for the patent dispute with Samsung," Chang said.
Non-operating profit declined to NT$28 million from NT$753 million a year earlier, Compal said. The company has investments in phone operator Vibo Telecom Inc (威寶電信), display maker TPO Displays Corp (統寶光電) and mobile-phone maker Compal Communications Inc (華寶通訊).
Compal Communications yesterday posted a 43 percent gain in fourth-quarter net income to NT$1.16 billion. Compal Electronics realized NT$700 million of that profit, and had combined losses of NT$700 million to NT$800 million from Vibo and TPO, Chang said.
Provisions for costs related to a dispute with Samsung over software used for the output of data from notebook keyboards led to a NT$282 million non-operating cost, Chang said.
Prices of notebook computers fell 9 percent last year compared with a 15 percent decline the year before, according to Bloomberg calculations based on data compiled by Credit Suisse Group.
Shipments of notebook computers will rise 38 percent this year to 20 million units, from 14.5 million last year, the statement said. Shipments climbed 69 percent last year from 9.8 million units in 2005, it said.
Liquid-crystal display monitor shipments will increase 10 percent this year to 3.3 million units, compared with a decline of 7 percent a year earlier, and shipments of televisions will rise 58 percent to 380,000 units this year, compared with a decline of 7 percent last year, according to the statement.
Full-year profits rose 4 percent to NT$8.75 billion from NT$8.42 billion a year earlier, with sales increasing 37 percent to NT$303.1 billion, the company said.
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