Hon Hai Precision Industry Co’s (鴻海精密) purchase of Cisco Systems Inc’s set-top box plant in Juarez, Mexico, would guarantee it more networking solutions orders and higher operating margins, Citigroup said yesterday.
Despite the news of the purchase of the set-top box facility, shares of the Tucheng District (土城), New Taipei City (新北市)-based company were little changed in Taipei trading yesterday, rising 0.68 percent to NT$89.1. The stock has fallen 29.57 percent from this year’s session high of NT$126.5 in February.
“We note that networking business has long been one of the most profitable businesses within Hon Hai, so the Cisco acquisition should also help 2012 margin,” Citigroup Global Markets analyst Kevin Chang (張凱偉) said in a note.
On Monday, Cisco announced it was selling its Juarez facility to Foxconn Technology Group (富士康集團) — also known as Hon Hai in Taiwan — as part of the US company’s effort to streamline its operations, according to a statement posted on its Web site.
Hon Hai confirmed the deal in a filing sent to the Taiwan Stock Exchange yesterday, saying that it had purchased the Juarez plant from Cisco System’s subsidiary Scientific-Atlanta LLC through a Hon Hai subsidiary, PCE Paragon Solutions Kft.
“Through this strategic alignment with Cisco, we will be able to leverage the operation’s unrivalled talent, technology and expertise in video and telco infrastructure to broaden our end-to-end vertical supply chain services in the video, broadband, networking, and telecommunications infrastructure sectors,” Michael Ling (凌志平), general manager of Foxconn’s Communication and Network Solutions Business Group (CNSBG), said in a statement.
The transaction is subject to regulatory approvals and was expected to close by October, Hon Hai said, without providing financial details of the transaction because of confidentiality agreements.
Citigroup said the pricing should be “favorable” to Hon Hai because Cisco is facing more pressure than at any point to restructure its business.
Chang said in his note that “CNSBG has long been one of the most profitable and margin-focused entities in Hon Hai.”
The move to tap into set-top boxes is in line with Hon Hai chairman Terry Gou’s (郭台銘) aim to diversify the firm’s product portfolio and maintain growth momentum following its purchases of a PC factory in Poland from Dell Inc in December 2009, a TV plant in Mexico from Sony Corp in September 2009, another Sony TV plant in Slovakia in April last year and the winning of Apple Inc’s iPhone and iPad orders.
“What these deals have in common, with the exception of iPad, is that Hon Hai will make much higher operating margin (likely at 4 percent) than corporate average business,” Chang wrote in the note.
Citigroup forecast Hon Hai’s operating margin will climb to more than 3 percent next year, allowing it to deliver earnings per share of between NT$12 and NT$13.
SEE CISCO ON PAGE 10
Alphabet Inc’s Google on Tuesday announced plans to buy a New York office building for US$2.1 billion, confirming its push into the US’ largest city despite the COVID-19 teleworking trend. This is the largest real-estate purchase in the US for an office building since the beginning of the global spread of COVID-19, the Wall Street Journal quoted Real Capital Analytics as saying. Google already rents the premises in Manhattan, which are located on the site of a former railroad terminal in the Hudson Square neighborhood. The Silicon Valley giant envisions a campus with a total surface area of 160,000m2 by mid-2023
Cash-strapped developer China Evergrande Group (恆大集團) has begun repaying investors in its wealth management products with real estate, said Hengda Real Estate Group Co Ltd (恆大地產), its main unit. Evergrande, with more than US$300 billion in liabilities, is in the throes of a liquidity crisis that has left it racing to raise funds to pay its many lenders and suppliers. It has a bond interest payment of US$83.5 million due on Thursday. The company said on WeChat on Saturday that investors interested in redeeming wealth management products for physical assets should contact their investment consultants or visit local offices. Financial news outlet Caixin on
‘CORE VALUES’: The contract chipmaker did not specify why the employees were dismissed, but media reports said they had leaked information about customer orders Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has fired seven of its employees for violating the company’s “core values,” the world’s largest contract chipmaker said yesterday. While the company did not disclose exactly why it fired the seven employees, local media reports earlier in the day said that the employees had leaked confidential information about customer orders. In a statement, the company said that it fired the seven at once, adding that it released an internal notice last week to inform the entire company of the move ahead of the four-day Mid-Autumn Festival holilday, which ended on Tuesday. TSMC said it fired the seven
MILD ADJUSTMENT: Two previous efforts failed to curtail mortgage financing, although the new measures should not affect property prices, the central bank governor said The central bank yesterday tightened credit controls for second-home mortgages in specific areas and purchases of plots of land, especially in industrial parks. However, the nation’s top monetary policymaker kept its policy rate at a record-low 1.125 percent for the sixth consecutive quarter, despite revising up its GDP growth forecast for this year from 5.08 percent to 5.75 percent. “Board members factored in economic uncertainty at home and around the world,” central bank Governor Yang Chin-long (楊金龍) said, adding that growing inflationary pressure was a temporary phenomenon induced by bad weather and a low base effect for oil prices. International fuel price increases
RSS