Asustek buys into Ability Enterprise to tap digital camera business

Asustek Computer Inc. recently announced it will acquire a 13% stake in digital camera maker Ability Enterprise Co., Ltd. for around NT$2.8 billion (US$84 million at US$1:NT$33), as part of its plan to strengthen business turf by integrating the segment.

Taiwanese industry watchers analyzed that the acquisition would drive Asustek to engage in direct competition against Hon Hai Precision Industry Co., Ltd. in global digital-camera market. Hon Hai, currently the world's No.1 contract electronics manufacturer, has acquired No.1 contract camera maker Premier. Ability is currently the world's No.3 maker in its field.

Asustek will make the acquisition through stock swap at the rate of one Asustek share for 1.71 Ability shares. Baseline date for the stock exchange is set on September 13 this year. Asustek will issue 29 million new shares for the swap.

With the ownership, Asustek will become the biggest shareholder of Ability, enabling it to hold half of Ability's nine director board seats. Asustek will put the acquired business under its contract-manufacturing operation although it may develop own brand for its cameras.

The world's No.1 notebook-computer manufacturer recently spun off its OEM operation into an independent company in hope of easing the conflict of interest between its brand-name operation and OEM operation. Asustek's chairman, Jonney Shih said many of his company's buyers has become reluctant to place outsourcing orders since Asustek began promoting brand names.

Shih stressed that Ability's strong business ties with Japanese and South Korean buyers like Casio, Nikon and Samsung will help his company acquire lucrative orders from Japanese camera suppliers.

Ability shipped 5.4 million cameras in the first half and has projected to deliver 10 million throughout this year. For next year, it has planned to ship 20 million cameras, posing a formidable threat to Hon Hai's digital-camera business.

Ability's executives pointed out that the acquisition will help their company bring down production costs by combing the two companies' resources.

Institutional investors pointed out that Ability made at least NT$3.5 per share before tax last half and projected the company to make NT$8 per share throughout this year.

World's Top Three Contract Digital Camera Makers

Company	Strategic Partners	Shipment Goal for 2007	Shipment Goal for 2008	Major Customers
Hon Hai	Premier	18 M	undisclosed	Olympus, Sony
Altek Corp.	None	12 M	18 M	Kodak, Pentax
Ability	Asustek	10 M	20 M	Casio, Samsung, Nikon

Sources: the companies

source & copyright: CENS