Compal posts first profit increase in six quarters

Worldwide increases in the sales of notebook computers is responsible for boosting Compal Electronics' profit gains, company officials say

Compal Electronics Inc (仁寶電腦), the world's second-largest contract notebook computer maker, yesterday announced profit gains in the second quarter, citing rising sales as more PC users switched to notebook computers.

The gain represented the company's first profit increase in six quarters, with net income advancing 13 percent to NT$1.83 billion, or NT$0.53 a share, from NT$1.63 billion, or NT$0.48, in the previous quarter.

Net sales grew 3 percent quarter-on-quarter to NT$51.7 billion in the second quarter. The company's second-quarter gross margin climbed to 6.2 percent from 5.8 percent in the previous quarter, according to the company.

"We are bullish about the market in the next half of the year and even more optimistic about next year," Ray Chen (陳瑞聰), president and chief executive officer of Compal, told investors yesterday.

With new models to be mass-produced in the fourth quarter of the year, Compal plans to ship 13 million to 14 million notebook computers next year, an increase of 15 percent to 20 percent from this year's level, Chen said.

As more computer users tend to replace their desktop computers with laptop computers because the rapid development of wireless Internet access gives them more mobility, the growth momentum of notebook computers will remain in the double-digit percentages through 2010, Chen said. By that time, the number of notebook computers will be half of that of desktops, he said.

Shares of Compal remained unchanged from Wednesday and closed at NT$31.45 yesterday on the Taiwan Stock Exchange.

Compal's performance in the second quarter is not bad, and will continue to climb next year with orders poached from its larger rival Quanta Computer Inc (廣達電腦), said Allen Pu (卜正倫), an analyst at SinoPac Securities Corp (建華證券).

The cut-throat notebook price wars, although eating into manu-facturers' profits, also helped to boost sales significantly, Pu said.

As a result of fierce competition, Compal's profit margin is likely to decline next year, therefore the company needs to work harder on cost control to maintain the margin at its current high level, he said.

To gain more market share, Chen said Compal plans to focus more on mainstream products -- which account for 30 percent of total notebook computer shipments -- as well as popular low-cost models that made up 30 percent to 40 percent of shipments.

In addition to notebook computers that account for 80 percent of Compal's sales revenue, the company plans to further expand its communications, Internet applications and TV products, Chen said.

For the first half of the year, Compal shipped 130,000 units of liquid-crystal-display (LCD) and plasma-display-panel (PDP) TVs. The number is expected to reach 300,000 units by the end of the year and 400,000 to 500,000 units next year, Chen said.

Responding to questions about Compal Communications Inc (華寶通訊), a handset division that spun off from the company at the end of June, Chen said margins might rise in the first quarter of next year after new models have hit the market. The imminent boom in third-generation handsets also bodes well for the company, he said.

source: Taipei Times