Pegatron eyes sales drop in non-computing line

SEASONAL IMPACTS::This quarter, the firm’s computing shipments are expected to drop by up to 25 percent, while its communication products are to perform better

By Helen Ku  /  Staff reporter

Tue, Mar 25, 2014 - Page 13

Pegatron Corp (和碩), which assembles Apple’s iPhones and iPads, yesterday said that it expects sales from its non-computing business to decline by between 15 and 20 percent this quarter from last quarter because of seasonal factors.

Sales from its computing business accounted for 37 percent of Pegatron’s total sales of NT$265.95 billion (US$8.71 billion) last quarter, while those from communication products and consumer electronics assembling businesses accounted for 33 percent and 30 percent respectively.

“Our consumer [electronics] and communication [products] manufacturing business are expected to continue to outperform our computing product assembling business this year,” Pegatron chief executive officer Jason Cheng (程建中) told an earnings conference in Taipei.

Pegatron’s notebook shipments for this quarter are predicted to drop by 20 to 25 percent from 3.6 million units last quarter, largely because of seasonal and demand factors, Cheng said.

Shipments of other products such as motherboards and desktop computers are forecast to drop by between 30 and 35 percent, he added.

Pegatron’s net profit hit a record high of NT$4.6 billion last quarter, bringing its full-year profit to NT$14.24 billion, the highest in the company’s history, with earnings per share of NT$4.16.

Cheng said the company would upgrade machines and adopt more automation to achieve better performance this year.

In response to analysts’ questions about whether the falling average selling prices of smartphone and tablets would hurt the company’s profit margin, chief financial officer Charles Lin (林秋炭) said the operating margin “will definitely improve at a steady pace.”

Because of a low comparative base, Pegatron’s operating income grew 74.9 percent quarter-on-quarter and 20.5 percent year-on-year to NT$5.11 billion last quarter, with an operating margin of 1.9 percent, which was slightly better than the previous quarter’s 1.2 percent and last year’s 1.6 percent.

When asked if Apple’s rumored new 12.9-inch iPad would help boost Pegatron’s sales this year, Cheng declined to say if Apple plans to launch a larger iPad this year.

“We can only say clients’ orders for larger mobile devices are growing because they saw a market there,” he said.

“Overall, Pegatron’s financial performance will stay robust or even better this year from last year because of ongoing improvements to production efficiency and because of client base and product mix diversification plans,” he said.

According to a report by Daiwa Securities on Thursday last week, Pegatron assembled 19 percent of Apple’s iPhone products last year, including the iPhone 4S and iPhone 5C models. It also manufactured 26 percent of Apple’s iPad mini products last year, Daiwa said.

Overall, Apple’s orders contributed up to 29 percent of Pegatron’s sales last year, and the figure could rise to 36 percent this year because of new orders for iPhone 5S, iPhone 6 and iPad Air, Daiwa analyst Steven Tseng (曾緒良) said in the report.