Pegatron Corp (和碩), which assembles Apple Inc’s iPhone 5C and iPad Mini products, yesterday said that sales of non-computing products were forecast to decline sequentially by between 5 and 10 percent this quarter due to seasonality.
The company also said that its motherboard and desktop shipments could fall by between 15 and 20 percent sequentially this quarter, but that notebooks shipments could grow 5 percent given a low comparison base.
“Our sales and net profit are likely to hit bottom this quarter, out of the whole year,” Pegatron chief executive officer Jason Cheng (程建中) told an investors’ conference, citing declines in sales of non-computing products as the main cause.
Sales of handsets accounted for 38 percent of Pegatron’s total revenue last quarter, followed by PC-related products at 31 percent and consumer electronics at 20 percent.
Thanks to Apple’s orders, Pegatron’s handset business expanded by about 82 percent year-on-year last quarter, while sales by its notebook, desktop and motherboard business shrank 13 percent over the same period.
Gross margin reached 5.2 percent in the first quarter, compared with 5 percent in the previous quarter and 5.5 percent a year earlier.
Cheng said Pegatron aims to sustain its gross margin above 5 percent this year through cost control, client diversification and product mix improvement.
However, Citigroup analyst Wei Chen (陳思維) questioned whether margins would be sustainable following Asustek Computer Inc (華碩) CEO Jerry Shen’s (沈振來) announcement at an earnings conference on Wednesday that Pegatron would be assembling the company’s latest ZenFone-series smartphones.
ZenFone handsets could be a drag on Pegatron’s gross margin given their low prices — between NT$3,990 and NT$6,990 (US$132.60 and US$232.30) — compared with the iPhone 5C’s US$549, Chen said.
“There are opportunities and risks [in making customers’ new products],” Cheng replied. “I think many more mobile products will enter the market — from smartphones to tablets and wearables — so we will keep making investments at the right time.”
Communication and consumer products will continue to be Pegatron’s main sales contributors in the long run, but the company will not give up its notebook business just because demand is weakening, he said.
The PC industry is “transforming, not disappearing,” he said, adding that Pegatron is considering producing different notebook products such as Chromebooks, or other Chrome-based products later this year or next year.
Pegatron posted a net profit of NT$2.73 billion, or NT$1.18 per share, in the first quarter, down 19.1 percent quarter-on-quarter, but up 18.5 percent year-on-year.
Consolidated revenue declined 17.8 percent quarter-on-quarter, but rose 0.5 percent year-on-year to NT$218.74 billion during the same period.
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