Kye said to have order from Palm in hand

Kye Systems Corp (昆盈) a major local manufacturer of computer peripherals, yesterday acknowledged it had received an order for an undisclosed number of Internet connection peripherals from Palm Inc, the world's leading provider of handheld computers.

Following local media reports about the order, Chuo Shi-yang, president of Kye Systems Corp, issued a brief statement yesterday through the Taiwan Stock Exchange acknowledging that Kye had recently received an order from a leading PDA company. Kye is to develop and manufacture the Internet connection peripherals, and shipment of the product would begin next year, the statement said.

confirmation

A manager at Kye later confirmed that Palm Inc was the customer in question, though no official announcement had been made. Kye signed a non-disclosure agreement with the customer, so it was not officially allowed to disclose the customer's name, the quantity or price of the order, the manager said.

Again, while not official, company sources and analysts said Palm has made an initial order for 500,000 to one million Internet connectors. The connector will connect the handheld computer to the Internet via a phone line, analysts said. If happy with the product and its sales, Palm is likely to make a larger order next year, local media reported.

Palm selected Kye for the order out of recognition of Kye's technical experience in this field and because Kye won't face any dilemma over which customer should come first, said the manager at Kye.

"We will do our best to support Palm because we will set it as our first priority," he said. Other companies are so large that Palm may not be their number one priority, he said.

Palm will also benefit from the lower production cost of the product, analysts said. "Kye is one of the best local peripheral firms," said Frank Wu, an analyst at President Securities Co. "It's very competitive."

Kye manufactures and markets peripherals such as mouse devices, scanners and keyboards. Since the beginning of this year, it has also started making information appliance products. After a poor fiscal year last year, Kye has moved away from self-branded products, sold under the "Genius" brandname, and into peripherals with low profit margins.

New strategy

Since the beginning of this year, its strategy has been to lay greater focus on product research and development in Taiwan, and OEM and ODM production in China. According to this strategy, 80 percent of production will be OEM or ODM based by the end of next year, the manager at Kye confirmed.

The order from Palm demonstrates this successful transition. "This order is positive because Kye is capable of making these connectors because of its past experience in these products," said President Securities' Wu. And perhaps more importantly, the market for Palm is very large, Wu said.

Palm claimed 68 percent of the worldwide market for personal handheld computers in 1999, according to International Data Corp, and its products are sold in more than 35 countries. Market researchers expect global sales of all handheld sets to quadruple in the next three years to 32 million units, worth US$7.2 billion.

On Wednesday, Palm announced it was forming an investment division called Palm Ventures to accelerate the growth of technologies and products designed for its operating system.