Tue, May 08, 2007 - Page 12 News List

Handset makers' shares retreat on shipment fears

DOWNTURN Motorola, whose orders account for nearly 90 percent of Compal's sales, is cutting jobs and reported a loss after disappointing sales

By Jason Tan  /  STAFF REPORTER

Shares in the nation's top-two handset contract makers fell yesterday, as reports said they would fail to meet annual shipment targets.

Shares of Compal Communications Inc (華寶通訊) plunged by the 7 percent daily limit to close at NT$113.50 (US$3.40) on the Taiwan Stock Exchange yesterday, while Arima Communications Corp (華冠通訊) dropped 2 percent to NT$34.40.

Compal Communications announced last Friday a cut in its shipments goal this year to 55 million units, down from its previous projection of 75 million.

The adjusted figure represents a 20 percent decrease from the 68.8 million units it shipped last year.

"The business outlook for the global handset industry is unclear and vendors are less optimistic compared to the past couple of years," Compal Communications spokesman Dennis Ko (柯典明) said in a statement to the stock exchange last Friday.

He added that fewer orders from the firms major clients also contributed to the downward adjustment.

Motorola Inc, whose orders account for nearly 90 percent of Compal Communications' sales, is cutting jobs and reported a first quarter loss on discouraging mobile phone sales.

Merrill Lynch and Co yesterday lowered its rating on the Taiwanese manufacturer to "sell" from "buy."

"Motorola's mid- and low-end mobile phones are not selling that well, which is impacting on Compal Communications' volumes," Merrill Lynch's analyst Tony Tseng (曾省吾) said in a report.

Compal prospects in the current quarter would continue to be sluggish, but an upside would occur during the traditionally busy second half, Merrill Lynch said, cutting its forecast on Compal's earnings per share this year by 23 percent to NT$9.

Compal's revenues slid 32.7 percent year-on-year to NT$5.02 billion last month. For the first four months, revenues were down 14.7 percent to NT$20.34 billion.

Meanwhile, Arima Communications is also expected to experience a negative growth in its full-year shipments.

Arima shipped 1.66 million handsets in the first quarter and it is expected to ship 2 million to 2.5 million units in the second quarter, according to DigiTimes.

With its first-half shipments at between 3.66 million units and 4.16 million units -- only 26 percent, at best, of the 16 million units projected for the whole year -- Arima may also fail to meet its annual target this year, the report said.

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