Shares of Quanta Computer Inc (廣達電腦), the world’s largest contract maker of laptops, yesterday rose more than 4 percent after brokerage houses backed the company’s forecast that tablets and servers would drive its growth momentum next year.
Quanta’s share price closed up 4.17 percent at NT$62.40 on the Taiwan Stock Exchange.
JPMorgan recommended buying Quanta’s stock on weakness given prospects for improving gross margins and strong sales growth for servers and tablets next year.
ROOM TO GROW
Quanta’s cloud-computing server and storage business is expected to grow as the company expands its customer base from two at present — Google Inc and Facebook — to multiple clients next year, which could include Amazon, Rackspace US Inc, Chinese Internet service providers and telecoms carriers such as AT&T Inc, JPMorgan said in a report yesterday.
“We also expect Quanta to be a key vendor to Amazon on the tablet front, which should help drive revenue growth and better operating margins,” JPMorgan said.
As the company moves to diversify away from notebook computers, Quanta on Monday said it expected non-notebook products to contribute more than 30 percent to total sales next year, up from about 25 percent this year.
“We are positive on Quanta’s focus on increasing its higher-margin server business and not being aggressive on low-margin notebook tenders next year,” Bank of America (BofA) Merrill Lynch said in a report yesterday.
SERVING UP TABLETS
Quanta is conservative on its notebook shipment growth next year, forecasting only 5 to 10 percent growth, while BofA Merrill Lynch said it expected the company’s server and tablet businesses to grow 75 percent and 107 percent respectively next year.
For tablets, thanks to a production ramp-up for Amazon’s Kindle Fire in September, Quanta’s tablet shipments are forecast to reach about 5 million by the end of the year and to double to 10 million units next year, Morgan Stanley said.
PATENT PROBLEMS
However, Daiwa Capital Markets said Quanta’s margin performance next year would be limited by a recent patent deal, in which Quanta agreed to pay Microsoft Corp licensing fees to produce Android and Chrome-based tablet PCs.
Daiwa Capital sets Quanta’s six-month target price at NT$49.
Quanta’s operating margin inched down to 1.12 percent in the third quarter, from 1.3 percent in the second quarter and 1.77 percent in the third quarter last year.
Quanta said the decline was caused by one-off testing and modeling fees for upcoming projects.
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