Quanta Computer Inc (廣達) is targeting double-digit sales growth in its wearable device business next year, when the segment is set to begin blossoming, a company executive said yesterday.
The focus on wearable devices, especially Apple Watch, could help enhance the company’s profitability outlook as its contract notebook computer manufacturing business faces tepid growth, industry watchers said.
“The company expects a significant growth in the wearable-devices business and we will invest more in this segment next year,” Quanta vice chairman C.C. Leung (梁次震) told a media briefing at the company’s headquarters in Linkou District (林口), New Taipei City.
The company did not specify what wearables it is making and who it is working for, but analysts, including JPMorgan Securities Ltd’s Gokul Hariharan and Alvin Kwock (郭彥麟), say the Taiwanese firm is putting the final touches on a smartwatch product that Apple Inc might launch sometime next year.
“Quanta’s first-half revenues for 2015 should be supported by the ramp-up of the Apple Watch project, which should also improve margins, since most of the costs were already incurred in 2014,” Hariharan and Kwock wrote in a note to clients on Tuesday last week. “We currently assume Apple Watch to see 15 million to 20 million annual shipments and Quanta to be the 100 percent supplier, implying an up to 8 percent revenue contribution in 2015.”
Last quarter, rising research and development expenses for new products saw the firm’s gross margin drop by 8.72 percentage points to 4.5 percent from the previous quarter’s 4.93 percent, while its operating profit margin also declined to 1.49 percent from the previous quarter’s 2.01 percent.
Net income was NT$4.73 billion (US$154 million) for last quarter, or NT$1.23 per share, up 1.7 percent from NT$4.65 billion last year and 16.4 percent from NT$4.06 billion the previous quarter.
Non-operating income totaled NT$2.48 billion last quarter, surging 79.71 percent from the previous quarter’s NT$1.38 billion, Quanta said, adding that the majority of the non-operating income was from foreign-exchange gains of NT$1.22 billion last quarter.
Consolidated revenues from July to September totaled NT$244.33 billion, up 10.9 percent year-on-year and up 13.9 percent quarter-on-quarter.
In the first 10 months of the year, cumulative revenue grew 10.07 percent year-on-year to NT$756.65 billion, the company’s data showed.
“Overall, Quanta did pretty well in the third quarter this year, especially in September and October, but sales in this quarter might see a single-digit decline as the market enters its traditional slow season,” Leung said.
The company’s notebook computer shipments totaled 13.7 million units in the past quarter, up 24.5 percent from 11 million last year and 19.1 percent from 11.5 million units in the previous quarter.
In the first nine months of the year, notebook shipments totaled 35.7 million units, Quanta said.
Global notebook shipments next year should be flat from this year, but Quanta would have “reasonable” growth in notebook computer segment, Leung said.
Quanta chairman Barry Lam (林百里) said the company’s notebook computer business did well last quarter and should remain stable this quarter.
As the company’s research and development into medical cloud computing is still in its early stages and because the segment involves many other hardware and software issues, Quanta still has a lot to learn, Lam said.
Asked by reporters if the free-trade pact between China and South Korea would have any negative impact on Quanta, Lam said he expected limited impact from the trade deal, as most of the company’s products are manufactured in China.
Quanta shares plunged 3.77 percent to NT$74.1 in Taipei trading yesterday ahead of the announcement of its quarterly results, underperforming the TAIEX, which lost 1.28 percent.
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