Inventec Corp (英業達) on Tuesday reported weakness in its core notebook computer business in the second quarter, leading the company to adopt a conservative outlook for the year and sending its shares plunging.
The company’s shipments of notebook computers were 4.7 million units in the past quarter, flat from the first quarter and lower than other laptop original design manufacturers (ODMs).
The weak performance was primarily due to stagnant sales of consumer models, Inventec chief financial officer Yu Chin-pao (游進寶) said in a conference call.
Yu said notebook shipments this year would likely stay at the same level as last year’s 20 million units, but expected shipments to start rebounding next year.
However, analysts are less optimistic about the company’s notebook business, saying it may not experience the kind of shipment growth in the traditional peak season in the second half of the year.
“When other notebook ODMs are getting healthy orders, Inventec does not have the capability to fight for new orders,” CIMB Securities Ltd said in client note yesterday.
Yuanta Securities Co (元大證券) forecast Inventec’s notebook computer shipments this quarter and next quarter would increase marginally to 4.8 million and 5.1 million units respectively. As a result, the firm’s full-year shipments will likely hit 19.3 million units, implying a 7 percent annual contraction, it said.
Inventec shares fell 3.12 percent to NT$24.8 yesterday in Taipei trading, underperforming the broader market’s 0.74 percent increase, as the firm’s second-quarter profit also fell short of market expectations.
Net profit declined 21.9 percent to NT$1.48 billion (NT$0.41 per share) from NT$1.89 billion (NT$0.53 per share) in the first quarter and 8.2 percent less than a year ago, when it posted NT$1.61 billion in net profit (NT$0.45 per share).
The average analyst estimate was NT$1.77 billion (NT$0.49 per share), according to Bloomberg Finance LP.
Yu said fluctuations in the exchange rate had an obvious impact on the company’s earnings last quarter, as foreign-exchange losses were NT$364 million in the quarter, compared with foreign-exchange gains of NT$462 million a year earlier.
Notebook computers accounted for nearly 50 percent of the company’s revenue in the first half, and Inventec has been increasing its dependence on non-notebook products such as handset, server, data center and solar power to enhance its profit margins.
In the second quarter, gross margin rose slightly by 0.3 percentage points quarter-on-quarter to 5.3 percent. However, operating margin was 1.6 percent, below the market estimate of 1.7 percent due to rising operating expenses.
Revenue from its handset business, including smartphones for China’s Xiaomi Corp (小米), increased in the second quarter and contribution is expected to gain more strength in the second half of the year, the company said.
David Ho (何代水), chief executive officer of Inventec’s handset subsidiary, Inventec Appliance Corp (英華達), said the company aims to ship between 40 million and 45 million smart devices this year, with full-year shipment split expected to be 45 percent in the first half and 55 percent in the second.
Inventec expects server revenue would grow steadily in the second half of the year, but CIMB said the company faces a potential threat from the recent server joint venture between Hon Hai Precision Industry Co (鴻海) and Hewlett-Packard Co.
HP accounts for more than 60 percent of the firm’s server orders, the brokerage said.
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