Fri, Feb 13, 2009 - Page 12 News List

Asustek promises a solution for its inventory issues

GLUT Asustek CEO Jerry Shen told investers that this quarter’s shipment targets would be cut to around 800,000 notebooks and 5 million motherboards

By Elizabeth Tchii  /  STAFF REPORTER

A woman inspects an Asustek Computer Inc handheld device at an expo in Taipei, Taiwan yesterday. Asustek posted its first quarterly loss yesterday after the global recession reduced demand and foreign-exchange declines eroded earnings.

PHOTO: BLOOMBERG

Asustek Computer Inc (華碩電腦), the world’s No. 1 motherboard manufacturer, yesterday said it would resolve its inventory issue before the end of this quarter, while downgrading its shipment forecast by 30 percent quarter-on -quarter across all product lines.

Without providing earnings guidance for the first quarter, Asustek chief executive officer Jerry Shen (沈振來) told an investor conference that this quarter’s shipment targets would be 4.5 million to 5 million motherboards, 800,000 notebooks and 1 million EeePCs, with a deviation of 10 percent, pulling its margins from the red.

Shen’s statement came as the company yesterday posted a record loss in the fourth quarter of last year, with earnings down by 143.8 percent quarter-over-quarter and a decline of 142.3 percent year-on-year to NT$2.8 billion (US$82.3 million).

For the whole of last year, net income lost 40.4 percent compared with 2007 to NT$16.46 billion, or NT$3.8 in earnings per share, because of poor management in inventory control and sizable foreign exchange losses amid the global economic slowdown, the company said.

Last year, the low-priced PC pioneer experienced yearly growth across product lines as shipments of motherboards, notebooks and EeePCs increased 7 percent, 35 percent, and 1,600 percent to 22 million, 5.8 million, and 4.9 million units, respectively.

The Neihu-based company is focused on channel sales this quarter to relieve a staggering inventory level of NT$41.82 billion, as well as decrease the average number of days goods remain in inventory to 45, compared to 63 days for the last three months, Shen said.

Moreover, Asustek said it made sizable inventory sell-through last month and implemented a vendor-managed inventory system to reduce risk.

In terms of losses related to foreign exchange, Shen said the company was now following the industry practice of locking in foreign exchange rates at quotation, which has an 80 percent accuracy rate.

Looking ahead, he foresaw an improvement in financial picture quarter-over-quarter this year, and projected good industry growth across all product lines.

Continuing projects this year include reducing operational costs by 10 percent, implementing cost-cutting processes through business unit consolidations and improving product value by introducing fewer models and pushing greater innovation, he said.

Edward Yen (顏子傑), associate director at UBS investment research, said yesterday he was disappointed with Asustek's performance. He declined to predict when Asustek would rebound from its steep losses because he said serious management issues and supply chain problems would plague the company beyond the first quarter.

UBS currently has a price target of NT$21 on Asustek shares.

Asustek shares closed down NT$0.05 to NT$31.00 yesterday before the investor conference, while its overall performance this year is down 15.8 percent.

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