“We don’t believe Asustek’s business is broken, but it needs a deeper-than-expected adjustment,” Credit Suisse analyst Thompson Wu (武光明) said in a client note on Friday.
Wu said he would be more positive about Asustek’s outlook if market demand for the company’s 2-in-1 detachable tablets proves strong and once prices of new PCs equipped with Intel’s Haswell processor reach levels that make them attractive to consumers.
Yet, its inventory issue shows that Asustek is facing weakened shipments to the US, where the company has placed a special focus on high-end notebooks, according to JPMorgan Securities Asia Pacific Ltd.
“Since high-end profits are very important for overall company margins, the US market weakness also increases the challenge in getting back to a 5 percent operating margin,” JPMorgan Securities analysts led by Gokul Hariharan said on Thursday.
In addition, competition on pricing from its peers such as Lenovo Group Ltd (聯想), Acer Inc (宏碁) and Samsung Electronics Co is heating up, raising more concerns about the outlook for Asustek’s margin, analysts said.
“The company will find it increasingly difficult to defend both its market share and profit margin at the same time,” Daiwa-Cathay Capital Markets Co analyst Steven Tseng (曾緒良) said in a separate note on Friday.
Many analysts now expect Asustek to ship between 18 million and 18.5 million notebooks and 10 million to 12 million tablets this year.
Earnings per share are forecast to fall in a range from NT$25.53 to NT$30.25 this year, compared with NT$29.79 last year, with revenue of between NT$395.26 billion (US$13.2 billion) and NT$419.64 billion, versus last year’s NT$413.15 billion, they said.