Asustek Computer Inc (華碩) received mixed reactions from market analysts after the PC maker last week reported a lower-than-expected net income for last quarter due to foreign currency volatility.
JPMorgan Securities Ltd said Asustek’s quarterly earnings of NT$4.5 billion (US$142.26 million) were 20 percent lower than the market consensus, while CIMB Securities Ltd said the PC maker’s NT$713 million foreign-exchange loss significantly eroded its non-operating income to NT$135 million last quarter from the previous quarter’s NT$1.98 billion.
The company’s foreign currency uncertainties will likely continue this quarter, despite the company saying it has started quoting orders in US dollars to minimize foreign-exchange losses, JPMorgan analysts led by Gokul Hariharan said in a note on Friday last week.
“Disregarding eurozone and emerging market currency volatility, we expect Asustek’s revenue this quarter to remain weak and perhaps drop quarter-on-quarter,” JPMorgan analysts said, citing a seasonal slow period and intensifying competition from tier-one PC makers.
JPMorgan said it believes Asustek’s guidance that PC shipments would grow 15 percent year-on-year is too lofty, given that the market outlook has become less favorable to tier-two vendors compared with a year ago.
Moreover, competition from Lenovo Group Ltd (聯想) and Hewlett-Packard Co is likely to become more fierce this year, the brokerage said.
CIMB analyst Wang Wan-li (王萬里) also expects Asustek’s notebook business, which accounted for 60 percent of its total sales, to face strong competition and pricing pressure this year.
“For this quarter, the company management has issued a guidance for about a 10 percent quarter-on-quarter decline for PC product shipments, which is in line with our expectations,” Wang said in a research note released on Friday.
Wang forecast that sales of Asustek-brand products would drop 19 percent quarter-on-quarter, with operating margin down 0.1 percentage points to 4.5 percent this quarter.
Asustek’s smartphone segment might see increasing shipments this year due to its low base last year, JPMorgan said.
However, the profitability of this segment remains a concern, given the growing competition from Chinese smartphone makers Xiaomi Corp (小米) and Huawei Technologies Co (華為), it added.
Yuanta Securities and Investment Consulting Co (元大投顧) kept its “Buy” rating on Asustek stocks unchanged.
“Asustek reported in-line pretax profit of NT$5.96 billion and its management said the foreign-exchange impact in the last quarter was short-term, as we anticipated,” Yuanta analyst Vincent Chen (陳豐丰) said on Friday.
Chen is upbeat about Asustek’s smartphone business, saying that if the firm’s handset sales are strong in China this quarter, its operating margin should be flat from last year’s 4.7 percent, or up 0.1 percentage points from last quarter’s 4.6 percent.
Asustek’s announcement that it will adopt Qualcomm Inc’s chips — which are cheaper than Intel Corp solutions — for smartphones beginning next quarter might raise the firm’s operating margin next quarter, he said.
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