Tue, Oct 25, 2011 - Page 12 News List

E Ink posted record-high Q3 earnings

‘RECESSION-PROOF’:E Ink’s chairman is betting on increasing sales of e-readers despite economic uncertainties, saying that people tend to read more in bad times

By Crystal Hsu  /  Staff Reporter

E Ink Holdings Inc (元太科技), which manufactures the displays used in 90 percent of the world’s e-readers, expects business to continue to improve this quarter on strong demand for electronic books that pushed its earnings to a new high last quarter, company chairman Scott Liu (劉思誠) said yesterday.

“We expect revenue in the fourth quarter to rise higher from the third quarter as demand for EPD [electronic paper displays] accelerates, while sales of LCD panels increase robustly,” Liu told an investor conference.

Net income totaled NT$2.25 billion (US$74.57 million) during the July-to-September period, growing 20.6 percent from the second quarter, company data showed. That lifted net profit for the first nine months of the year to NT$5.25 billion, an increase of 18.8 percent from the same period last year and translating into record earnings of NT$4.86 per share.

“The figures supported our forecast that growth momentum will build up ahead of Christmas,” Liu said. “Surveys show that more consumers wish to own an e-reader. The product is recession-proof because in bad times, people spend more time reading.”

Liu voiced optimism that shipments of e-readers could hit the company’s forecast of between 25 million units and 30 million units this year.

E Ink — whose customers include Amazon, the world’s largest online bookstore, and Sony Corp — is also confident of revenue expansion as a result of Amazon’s low-price marketing strategy for its tablet, Kindle Fire.

The Kindle Fire, which has a seven-inch screen, uses E Ink’s fringe field switching (FFS) technology.

E Ink’s gross margin widened to 35.4 percent in the third quarter, from 32.5 percent in the second quarter, thanks to stronger sales of EPD, as well as cost-control measures, Liu said.

EPD, which generates higher profit, made up between 70 percent and 75 percent of the company’s overall sales, he said.

However, the expected increase in sales of LCD panels could squeeze margins this quarter, Liu said.

Shipments of LCD panels were modest last month, but are seeing a sharp pickup this month, Liu said, confident that shipments would remain high through the Christmas season because of Amazon’s competitive pricing strategy.

Amazon’s strategy has had a limited impact on E Ink’s bottom line because the two sides put their cooperation terms in black and white early this year, Liu said.

To meet growing demand, E Ink had signed a contract with Chunghwa Picture Tubes Ltd (中華映管) to help supply LCD panels, Liu said.

Liu shied away from speculating on the business outlook next year, saying it was too early to tell.

“I would save comment until after Christmas,” he said. “The strength of sell-through will shed light on the year ahead.”

E Ink shares closed up 2.5 percent at NT$69.70 yesterday, lagging behind the TAIEX’s 2.97 percent gain, Taiwan Stock Exchange data showed.

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