FIH Mobile Ltd (富智康) yesterday issued a profit warning for the first half of the year in a statement filed with Hong Kong Exchanges and Clearing Ltd.
The Hon Hai Precision Industry Co (鴻海精密) subsidiary said it expected to post a net loss of less than US$110 million for the six-month period ending in June, as the acquisition of Nokia’s feature phone business weighed on its bottom line.
Joining forces with Finland-based HMD Global, the company in December last year completed a deal to acquire Nokia’s assets from Microsoft Corp for US$350 million.
The acquisition price was only a small fraction of the US$7.2 billion Microsoft paid for them in 2014.
The expected loss for FIH, in which Hon Hai owns about a 70 percent stake, represented a significant retreat from a net profit of US$20.82 million in the same period last year, FIH said.
In the statement, the company attributed the expected lackluster first-half performance to “costs relating to a new business group within the company under a collaboration agreement announced on May 18 last year,” referring to the deal to buy the Nokia assets.
FIH said it expected to continue to book the costs related to the acquisition in the second half.
Despite the profit warning, FIH said its consolidated revenue for the first half of the year could surpass US$4.6 billion, up more than 99 percent from a year earlier.
An aggressive investor in India, FIH made the deal with Microsoft last year partly to support parent Hon Hai’s interest in building its presence in the fast-growing Indian mobile phone market.
Under the deal, FIH acquired Nokia’s assets, which involve the technology, manufacturing, design and marketing of cellphones and other handheld devices under the Nokia name, as well as some of Nokia’s intellectual property.
Because Hon Hai owns a majority stake in FIH, its profitability is likely to also suffer this year, analysts said.
Hon Hai last year posted a net profit of NT$148.66 billion (US$4.9 billion), up 1.22 percent from a year earlier, or earnings per share of NT$8.60, compared with NT$8.54 in 2015.
The figure was the highest in Hon Hai’s history, boosted largely by the launch of the latest iPhones by Apple Inc in September last year.
The new iPhones — the 5.5-inch iPhone 7 Plus and the 4.7-inch iPhone 7 — helped Hon Hai command a higher profit margin.
Its bottom line also benefited from foreign-exchange gains due to a weaker New Taiwan dollar in the fourth quarter, analysts said.
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