Mon, Jul 13, 2009 - Page 12 News List

FEATURE : Wistron offers model for success in adverse times


Eyeing the opportunities that closer economic cooperation with China represents, investors are favoring financial and property stocks, while losing their appetite for shares of tech companies, which are struggling amid the slump in demand.

But Wistron Corp (緯創) defied the trend last quarter, becoming one of the tech stars on the local bourse. The nation’s No. 3 contract maker of notebooks outshone its rivals, expanding revenues nearly 40 percent year-on-year in the quarter ending June 30.

Wistron shares gained 49 percent in the second quarter to NT$54.5 from NT$36.55 at the end of March, beating the TAIEX index’s 23 percent gain.

The local bourse has outperformed its Asian counterparts in recent quarters.

“Wistron is our preferred notebook original design manufacturer [ODM], given its solid execution, strong growth prospects, improving cash conversion cycle and focus on profitability,” Ellen Tseng (曾雅蘭), an analyst with Nomura’s Taipei branch, said in a report on June 23.

Wistron’s notebook shipments may expand 16 percent this year to 25.5 million units, Tseng predicted.

She gave a “buy” rating for Wistron, compared with a “neutral” rating on bigger rivals Quanta Computer Inc (廣達) and Compal Electronics Inc (仁寶).

Tseng is one of many tech analysts who have made Wistron their favorite stock among PC companies trading shares in Taiwan.

Foreign investors have significantly increased their holding in Wistron to 64.92 percent at the beginning of this month from 46.18 percent at the beginning of the year.

But Wistron’s story has not always been positive. For a long time, the company struggled after spinning off from Acer Inc (宏碁) in 2001. In recent years, it has gained ground by expanding its customer line-up to include Dell Inc, Hewlett-Packard Co and Lenovo Group Inc (聯想).

Commenting on the transformation, Wistron chairman Simon Lin (林憲銘) said innovation was an important factor to increasing a company’s value.

At a June 11 seminar on strategies to ride out the financial crisis, Lin said: “Economic slowdown has prompted some crucial changes in the PC industry’s value chain. Big PC brands are tightening their research and development budgets and even cutting marketing spending. These changes represent new opportunities for ODMs to increase their value.”

To find growth opportunities in a time of economic recession, Lin suggested manufacturers form innovation teams to brainstorm product ideas for customers rather than simply seeking to offer lower production costs — an almost impossible mission that squeezes profits.

Rather than the conventional approach of leaving new products to engineers, Wistron’s innovation teams are in themselves innovative. They consist mostly of employees with expertise outside of engineering and include a higher percentage of women, Lin told the forum, organized by CommonWealth magazine.

In addition, Wistron is forming deeper partnerships with customers by helping them provide cheaper and faster maintenance and logistics services to PC users, Lin said.

The company helps clients provide these services in Taiwan, Hong Kong, China, Japan, Singapore and North America, he said.

In other words, Wistron is more than a traditional ODM, he said: It offers technological services.

In addition to rethinking its business model, Wistron has improved its technological capabilities. The company focuses on research and development (R&D) to make sure it can offer products that meet the needs of customers and end-users.

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