Compal Electronics Co (仁寶電腦) yesterday said its notebook computer shipments might drop by a high single-digit percentage this quarter from last quarter and gross margin might slide from last quarter’s 3.8 percent amid continuing weakness in the global PC market.
However, shipments of smart devices, which include tablets and handsets, might jump 30 percent this quarter, as the company’s tablet clients increase market shares, Compal president Ray Chen (陳瑞聰) told an investors’ conference.
Compal assembles Apple Inc’s iPad Mini series and Amazon.com Inc’s Kindle tablets.
Notebook revenue contributed 73 percent to the company’s total sales last quarter. In the first three quarters, Compal shipped 29.4 million notebooks, down 6.36 percent from 31.4 million units a year ago.
Next year, notebook shipments might remain flat or fall by single-digit percentages from this year, as industry headwinds would extend into next year, Chen said.
As for smartphone sales, Chen said the growth momentum of the segment in the second half of this year is weaker than the company’s previous forecast, after clients decided to streamline their product portfolios.
“Smartphone shipments this quarter might increase mildly from last quarter,” Chen said.
To meet demand from Compal’s Chinese and Indian smartphone clients, Chen said the firm has set up a new manufacturing plant in India.
The plant is to become operational in the first quarter of next year, with an initial production capacity of 200,000 handsets per month, he said.
Compal expects gross margin to contract this quarter on lower revenue scale, but vows to tighten cost control to offset the impact.
"This management guidance suggests clear downside risks to our fourth-quarter forecasts, as we expect revenue to grow 7 percent quarter-on-quarter with the gross margin at 4.0 percent versus. 3.8 percent in the third quarter," Daiwa Capital Markets said in a note yesterday.
For next year, Daiwa said Compal’s revenue might be flat from this year on soft market demand for notebooks, smartphones and tablets.
Compal is working to expand its non-notebook business to offset the softness of that segment, Chen said, adding that he expected the contribution of the non-notebook business to grow from this year’s 27 percent to 35 percent next year.
The company also plans to spend a “significant” amount of money from next year’s capital expenditure of NT$6 billion (US$182.37 million) on its new non-notebook businesses, such as smart clothing, he said.
“The smart-clothing business is to start making contributions to the company’s total revenue from the second half of next year,” Chen said.
Citing new orders and clients, Compal’s server segment should also enjoy a growth in sales next year, he said.
Last quarter, Compal’s net income climbed 12 percent annually and 92 percent quarterly to NT$2.88 billion, or NT$0.67 per share, thanks to growth in notebook shipments and foreign exchange gains of NT$940 million.
Daiwa said Compal’s third-quarter profit beat its forecast of NT$2.5 billion on strong forex gains of NT$940 million, but both of its gross and operating margins of 3.8 percent and 1.2 percent missed its estimates of 3.9 percent and 1.4 percent respectively, due mainly to slower smartphone demand in China.
This story has been updated since it was first published.
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