Zyxel stands apart with forecast

Zyxel Communications Corp (合勤科技), one of the world's leading suppliers of equipment for the network communications market, broke the mould that has enveloped Taiwan's electronics sector in recent months by pointing to record sales in the fourth quarter of the year and painting a rosy picture of strong growth next year. Zyxel announced Thursday at an investors meeting that it anticipated revenue of NT$1.25 billion for the fourth quarter, and NT$3.7 billion for the year. The year 2000 figure is more than double last year's revenue and a fifth higher than the company's financial forecast for the year. The network equipment maker is anticipating sales growth of 35 percent to 50 percent next year.

The predictions stand out amid recent profit or inventory warnings by some of the world's major communications companies and as world economies start to feel the impact of a slowing US economy. Telecommunications equipment maker Lucent Technologies Inc (朗訊科技) issued its second earnings warning in three months on Thursday and said it anticipated significant losses in the first quarter of next year.

"I haven't seen this kind of growth company for a while," said Elise Tung, an analyst at Taiwan International Securities Co (金鼎證券). "Zyxel's not going to post 100 percent growth next year, but it's very stable, and quite conservative. You can really count on them," said Tung.

Zyxel has diversified this year from its core modem and router business into broadband networking equipment. The move has been very successful, analysts said.

In March, Zyxel and Lucent Technology Taiwan won three contracts to provide asymmetric digital subscriber line (ADSL)modems and routers to Chunghwa Telecom Co (中華電信), Taiwan's state-run phone company. Chunghwa Telecom has been expanding its ADSL service aggressively throughout the year.

Then in September, Telefonica, Brazil's largest telecommunications company, selected Zyxel as its supplier of ADSL equipment for the high-speed broadband communications services it plans to build throughout the country.

"This year's growth was very strong because the shipments of broadband products was so good," said Philip Wu, an analyst at China Securities Co (中信證券). Broadband refers to the fixed or mobile transmission of much higher volumes of data at much higher speeds than traditional fixed line telecom networks.

Wu is predicting Zyxel will earn NT$1.80 per share this year. The company predicted profits for the year could reach NT$380 million this year, marking a rise of over 50 percent compared with last year. Analysts' average earnings per share prediction for this year is NT$1.66, according to Barra Global Estimates.

Meanwhile, next year looks like its getting off to a strong start as the company anticipates winning at least part of a large order for broadband network equipment from Chunghwa Telecom. The telecom company plans to decide on suppliers for an order for 1.2 million pieces of ADSL-related equipment.

"We predict Zyxel can get 30 percent of this tender, which means 360,000 routers," said Philip Wu. Routers forward data packets from one local area network or wide area network to another via the most efficient route.

Zyxel said that its financial forecast for next year would be clearer once the results of Chunghwa Telecom's open tender are known. Still, analysts anticipate sales growth of up to 50 percent next year and profit growth of 30 percent to 40 percent. Philip Wu predicts the company will earn a profit of NT$2.42 per share next year.