Inventec Co (英業達), Taiwan's third-largest notebook computer maker, said profit will fall in the fourth quarter and the first quarter next year from a year earlier because Hewlett-Packard Co, its sole customer, cut prices.
Net income for the last three months of the year will drop as much as 30 percent to between NT$700 million (US$20 million) and NT$800 million from NT$996.5 million a year ago, Alexander Hsu
First-quarter profit will decline by about 10 percent from NT$836.2 million posted in January to March this year.
Personal-computer makers are cutting prices to revive sales, which fell last year for the first time since 1985 and will drop 9 percent this year, market researcher International Data Corp said.
Inventec is harder hit than its rivals because of its dependence on the world's second-largest seller of personal computers, some investors said.
``Hewlett-Packard has been cutting prices since its merger with Compaq Computer Corp. earlier this year,'' said Guan Shaoping, who helps manage US$1.6 billion in Asia for Credit Agricole Asset Management, and sold his stake in Inventec a few months ago.
Inventec said it expects sales will rise by 30 percent next year with its first orders from Toshiba Corp. Demand will also rebound from a two-year slump on more orders from Hewlett-Packard.
``We have new orders starting in the second quarter next year,'' Hsu said. ``We expect the industry to pick up.''
Fourth-quarter sales will rise almost a third to about NT$18 billion from a year ago, he said. Sales this year are expected to grow 7.5 percent from last year.
To cope with lower prices, Inventec's notebook manufacturing unit is moving more of its production to China. It will cut as many as 500 jobs in Taiwan, or a quarter of its staff, as a result of the shift, Hsu said.
Inventec said on Tuesday it designed and will make a new notebook computer, the Presario 3000, for Hewlett-Packard.
While Inventec expects to win more Japanese customers next year, the pressure on prices will continue, the company said.
``Hewlett-Packard always wants us to cut prices,'' Hsu said.
``We're controlling expenses by cutting travel and entertainment costs and asking our component suppliers to cut their prices,'' she said.
Inventec is considering the possibility of selling notebook computers under its own brand name for US$500, he said.
The company is also in talks with TCL International Holdings Ltd, to sell notebook computers to the Chinese company. The order, if realized, will be less than those from Hewlett-Packard or Toshiba, Hsu said.
Taiwan companies make about 60 percent of the world's notebook computers, mainly for US companies such as Dell Computer Corp and Hewlett-Packard, according to Market Intelligence Center (市場情報中心), a researcher funded by the government.
Inventec's profit is being hurt by Hewlett-Packard's cost- saving efforts. Inventec's gross margin for notebook computers, which shows how much a company earned after paying production expenses, will be about 6 percent in the current quarter, Hsu said.
In contrast, rival Compal Electronic Inc's
Inventec also makes computer servers for Hewlett-Packard that companies use to route communications through the Internet.
The company's gross margin for servers will fall to 10 percent next year from about 15 percent this year, Hsu said.
The company plans to produce at least 80 percent of its output in Shanghai by next year compared with 50 percent now.
Inventec said it can save US$6 on every notebook computer by making them in China.
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