Shares in Ambit Microsystems Corp (
However, while reduced orders from Apple are likely to have an effect on Ambit's revenue, the impact will not be so great as to justify the plunge in the share price, analysts said.
The company was also keen to play down the effect of Apple's announcement. "Apple is one of our customers," said William Hsu, chief financial officer at Ambit, "but we deal with Compaq, Dell, almost all the top ten notebook makers." Any cutback by Apple would influence only a portion of total sales, he said. Ambit, an affiliate of Acer Group, is a major manufacturer of internal modem modules and power supply units for notebook computers.
The nearly 25 percent stake held by foreign investors in the company is the second highest foreign holding of a company in the electronics sector of the main market.
Apple's announcement that fourth quarter earnings would fall as much as 33 percent short of forecasts came less than a week after Intel Corp issued its first profit warning in two years. Apple blamed a sales slowdown in all geographical areas, lower than expected education sales, and slower than expected sales of its new Power Mac G4 Cube.
In response, Ambit's share price fell by almost the maximum seven percent limit in the first ten minutes of trading. Trading then dried up, and the share stayed limit down for the rest of the session. It closed down 6.75 percent at NT$221.
"The reaction to the news was excessive," said Hsu. As well as having a larger client base than in the past, the company is now producing an increasing number of new telecommunications-related products. "All of these are not for Apple," said Hsu.
This year, the company has been developing asymmetric digital subscriber line terminal adapters, cable modems and radio frequency modules for mobile phone handsets for Global System Mobile communications. It will start product delivery of the new products in the second half of the year, said Hsu.
Analysts agreed that the drop in the share price was an overreaction, but given the current market conditions, not so surprising.
"Ambit's stock is trading at a pretty high P/E in a bear market," said Robert Cheng, an analyst at CLSA. "So with any bad news like this, it's going to drop," he said.
Apple also remains Ambit's second largest customer after Acer, analysts said. So the effect of decreased shipments to Apple is still likely to have an impact on Ambit, even if smaller than in previous years.
Apple accounted for 17 percent of Ambit's revenue in 1999, said Belle Chang, an analyst at Merrill Lynch, Pierce, Fenner & Smith Inc Taiwan Branch. This year it should be below 15 percent, she said.
Nevertheless, analysts said the company's diversification of its product base into broadband products will reduce any effect on revenue caused by a slowdown at Apple.
"Looking at this company's growth going forward, it's mainly achieved by ADSL and cable modems," said Merrill's Chang.
The share price fall was therefore a little excessive, she said. "Currently, we don't have any plans to adjust our earnings estimates," she said, adding that she sees the company as a good long-term investment.
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