Wed, May 07, 2008 - Page 12 News List

Compal cuts shipment forecast, citing supplies

ON THE BRIGHT SIDE Component shortages could force Compal to undercut its shipments, but it could be a chance for the company to trim losses

By Lisa Wang  /  STAFF REPORTER

Compal Electronics Inc (仁寶), the world’s second-largest maker of laptop computers on a contract basis, yesterday slightly cut its shipment forecast for the current quarter, citing fewer component supplies amid mounting prices as a limiting factor.

Prices for battery cells have increased after an LG plant halted production following a fire, president Ray Chen (陳瑞聰) told an investor’s conference. Rising raw material prices such as crude oil are also raising the prices of other components such as plastic casings, he said.

“We are facing heavier pressure this quarter from our component suppliers, who are requesting price hikes,” Chen said.

If it turned down component makers’ requests Compal could face insufficient supply and thereby undercut its shipments, Chen said.

“We are seeing this happening lately,” he said.

Compal forecast shipments to grow 10 percent this quarter from 6.17 million units in the first quarter, which is lower than a 12-percent quarterly expansion estimated earlier this year.

“We are in close talks with our customers about [upward] price adjustments to pass on rising component prices at a proper time — probably in the second quarter,” Chen said. “We have some confidence [in reaching an agreement].”

For the full year this year, Compal said it aimed to ship 32 million notebook computers. Chen said less than 2 percent of that amount would be low-cost laptops and he expects low-cost PCs to account for 5 percent to 10 percent of global notebook shipments this year, which could be 130 million in total.

“Demand seems to be soft in the first and second quarters because of reduced corporate spending in response to the subprime crisis in the US. But demand in Europe and emerging markets is quite strong,” Chen said.

Instead of seeing component shortages as an imminent problem, Sean Hsiao (蕭文良), who tracks the PC industry for Fubon Securities Investment Services Co (富邦投顧), said “rising component prices will give Compal an extra bargaining chip in negotiation with customers such as Dell Inc.”

That could serve as a chance for Compal to trim losses in its gross margin as local notebook computer makers have taken orders at the expense of their gross margins amid stiff competition, Hsiao said.

Compal expects gross margin to remain flat or even improve slightly this quarter, compared with 4.7 percent in the January to March period, Chen said.

Revenues may grow 5 percent to 10 percent this quarter from last quarter’s NT$101.64 billion.

Compal said on April 30 that first quarter earnings jumped 23 percent to NT$3.21 billion, or NT$0.84 a share, compared with NT$2.6 billion, or NT$0.69 a share, a year earlier.

The company allocated about NT$460 million for employee bonuses in the first three months.

Compal shares climbed 1.51 percent to NT$33.55 yesterday, while bigger rival Quanta Computer Inc (廣達電腦) dropped 0.77 percent to NT$51.6.

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