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Handset makers suffer on Motorola's bad news

Shares of several local handset and handset component makers plunged yesterday after Motorola Inc, the world's No. 2 mobile phone maker, posted weaker than expected fourth-quarter earnings.

Merry Electronics Co (美律), Chi Cheng Enterprise Co (及成), Cheng Uei Precision Industry Co (正崴) and Catcher Technology Co (可成) saw shares drop by the maximum limit to NT$67.9, NT$31.75, NT$54.1 and NT$92.7 respectively.

The benchmark TAIEX rose 1.47 percent yesterday.

"We expect Motorola to continue to affect the performance of Taiwan handset component makers in the first-quarter," SinoPac Securities Corp (永豐金證券) analyst Vincent Chen wrote in a client note.

Chen said Chi Cheng, Merry, Compal Communications Inc (華寶), Ichia Technology Inc (毅嘉), Silitech Technology Corp (閎暉) and Largan Precision Co (大立光) were among local companies that would see negative impact from Motorola's poor financial figures in the first quarter this year.

Ichia and Largan also saw shares plunge by the limit to NT$19.4 and NT$277.5 respectively, after shares of Motorola plunged more than 23 percent overnight in New York following its bearish business assessment.

On Wednesday, Motorola said sales were expected to drop more than 15 percent this quarter from the previous quarter, adding that the company might see net losses of between US$0.05 and US$0.07 per share.

Citi Investment Research's Taipei-based analysts Dale Gai (蓋欣山) and Kirk Yang (楊應超) said they were less optimistic about Asian handset companies supplying Motorola.

"With little indication of a recovery and intensifying competition among Motorola's Asian suppliers, we think most stocks will trade even lower than their historical valuation troughs in the first half of this year," Gai and Yang wrote in an investment note released yesterday.

As a result of risks arising from the uncertainty of Motorola's orders and product launches, both Gai and Yang recommended that clients offload shares in Compal, Cheng Uei and Catcher.

They also named High Tech Computer Corp (HTC, 宏達電) as their favorite among companies in the Asian handset supply chain.

Also see: Motorola executive offers gloomy assessment
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