Quanta Computer Inc (廣達), the world’s largest contract notebook computer maker, said its laptop shipments for this quarter are expected to fall flat from last quarter, with operating margin likely to be hit by weaker operating leverage and higher expenses from developing new products.
Aligned with clients’ scheduled launches of new products next quarter, the company said its overall shipments in the second half of this year are likely to outpace those in the first half.
The thin and light notebooks and gaming models are still performing well, but overall market weakness remains, Quanta vice chairman C.C. Leung (梁次震) said on Friday last week.
Total notebook shipments for this year are expected to decline by up to 5 percent year-on-year, Leung said, but added that the company remains positive on the business outlook for wearable devices.
Quanta is the main assembler of Apple Inc’s MacBook and Apple Watch. Headquartered in New Taipei City’s Linkou District (林口), the company also manufactures cloud computing-based servers for clients such as Amazon.com Inc, Facebook Inc and Alphabet Inc’s Google.
Growth momentum in the cloud computing-based server business should remain strong this year, the company said.
It predicted double-digit percentage growth in server sales thanks to an increase in orders from major clients.
“Quanta began to receive rack [server] orders from a Chinese customer, which we believe is Baidu (百度), in the first half of this year,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Vincent Chen (陳豊丰) said in a research note on Friday last week.
The company has since last year been in an investment phase, targeting areas such as artificial intelligence, augmented reality, virtual reality and 5G connectivity, Chen said.
“This means Quanta has chosen to sacrifice short-term margin performance for long-term growth,” he said.
Chen’s comments came on Friday after Quanta released weaker-than-expected bottom-line figures for last quarter.
The company had announced that net profit fell 2.1 percent year-on-year and 24 percent quarter-on-quarter to NT$2.74 billion (US$92 million), the lowest since the fourth quarter of 2010.
Earnings per share fell to NT$0.71, compared with NT$0.72 a year earlier and NT$0.93 the previous quarter.
Gross margin retreated by 0.55 percentage points year-on-year and 0.02 percentage points quarter-on-quarter to 4.18 percent due to unfavorable foreign-exchange rates and product portfolio changes.
Operating margin also fell to 1.33 percent last quarter, from 2.05 percent a year earlier and 1.46 percent the previous quarter, due to the effect of lower operating leverage and rising research expenses in the server business, the company said.
KGI Securities Investment Advisory Co (凱基投顧) said Apple’s delayed launch of its new MacBook is likely to cap Quanta’s sales growth this year, although expansion of its cloud business and a turnaround in the wearable segment could make earnings contributions to the company.
KGI revised forecasts for Quanta’s revenue and earnings downward because of the effect of declining sales on its notebook business.
The brokerage expects the company’s revenue to fall 2.6 percent annually to NT$994.53 billion and earnings per share to drop to NT$3.7 from NT$3.73, analysts Angela Hsiang (向子慧) and Jim Liou (劉峻廷) said in a note on Friday.
Quanta shares closed at NT$53.1 on Friday last week in Taipei trading, down 14.22 percent this year.
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