Asustek Computer Inc (
The company is to separate its contract production business into two new companies -- Pegatron Technology Corp (
"It is not easy for Asustek to achieve the scale required today in both the brand and contract businesses ... It is [therefore] time to spin off," company chairman Jonney Shih (
The spinoff is one year ahead of its original schedule, as more contract business clients have been expressing concerns over the momentum of Asustek's brand operations.
Asustek said that Pegatron will work on contract personal computers and related products, while Unihan will focus on the non-PC segments including broadband equipment, game consoles and casings.
These two firms are 100 percent owned by Asustek and their future initial public offerings "would most likely be made in Taiwan." But we have not ruled out other destinations as alternatives, Shih said.
"The spinoff is nothing new," said Henry King (
It follows the Acer Inc-Wistron Corp (
Acer has since focused on marketing rather than research and development and become the world's third-largest PC brand maker.
However, King said the spinoff into two companies went beyond his expectations and that execution would be the key to success.
Other analysts raised concerns over the splitting of the contract business into two, saying it would be better for one firm to offer "one-stop shopping," as non-PC products have been consolidating.
Acknowledging the trend, Shih said that Unihan and Pegatron could be merged in future, but the former would need to be an individual firm for the moment as it has to undergo expansion activity -- including mergers -- to grow its non-PC segment.
Sales forecasts for Asustek this year are NT$750 billion (US$23 billion) to NT$800 billion, with the brand segment accounting for NT$250 billion, Asustek chief financial officer David Chang (張偉明) said.
PC contract business will sell NT$300 billion to NT$350 billion, while the non-PC segment will represent NT$150 billion to NT$200 billion, Chang said.
Last year, the brand segment contributed 38 percent of Asustek's total sales of NT$560 billion.
Asustek shares closed up 3.43 percent to NT$93.50.
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