Taiwan PC Makers Post Profit Rises

By LORRAINE LUK And TING-I TSAI

TAIPEI—Taiwan's major personal-computer makers—Acer Inc., Compal Electronics Inc. and Quanta Computer Inc.—reported rises in second-quarter net profit, helped by a recovery in demand for electronic products.

But Quanta offered a cautious outlook for the second half, in an indication that growth may be slowing due to economic uncertainties in the U.S. and Europe.

Analysts say that PC manufacturers' profit margins continue to be pressured by their growing exposure to low-cost products such as netbooks—laptops that can conduct basic Internet and computing functions—and rising price competition from rivals. Quanta President C.C. Leung said increasing competition will continue to pressure the company's gross margin for the remainder of this year and next year.

Market research firm Gartner on Tuesday reduced its forecast for PC shipment growth in the second half by about two percentage points to 15.3% due to the uncertain economic outlook in the U.S. and Western Europe. But for the full year, Gartner expects world-wide PC shipments to rise 19% to 367.8 million units from 308.3 million units in 2009.

"The slow pace of economic recovery and austerity measures in Europe have made PC suppliers very cautious in 2010. However, consumer demand is likely to remain strong even if the economic recovery stalls because consumers now view the PC as a relative 'necessity' rather than a 'luxury' and will continue to spend on PCs, even at the expense of other consumer electronic devices," said Ranjit Atwal, research director at Gartner.

Acer, the world's second largest personal-computer maker by shipments after Hewlett-Packard Co., said its audited net profit for the three months ended June 30 rose 55% to 3.6 billion New Taiwan dollars (US$112.4 million) from NT$2.3 billion a year earlier. Revenue rose 26% to NT$150.3 billion from NT$119.1 billion.

Quanta, the world's largest contract maker of notebook PCs by revenue, said its net profit for the three months ended June 30 rose 4% to NT$5.1 billion (US$159.4 million), or NT$1.35 a share, from NT$4.9 billion, or NT$1.34 a share, a year earlier. But the result fell short of analysts' expectations of NT$5.3 billion. Consolidated revenue in the second quarter rose 63% to NT$295 billion from NT$181.1 billion.

Quanta said it expects shipments in the third quarter to be flat or drop slightly from the 13.7 million units it shipped in the previous three months because of softening demand from developed markets such as Europe and the U.S. But the company maintained its target of growing its full-year shipment by 40% to 50 million laptops this year.

"We will improve our cost structure and ramp up our revenue from non-notebook products such as mobile computing devices to mitigate the gross margin pressure," said Chief Financial Executive Elton Yang at a press briefing.

Quanta said its second-quarter gross margin fell sharply to 3.4% from 6.2% a year earlier due to rising component costs and higher marketing expenses for new products.

Compal Electronics, the world's second-largest contract maker of notebook computers by revenue after Quanta Computer, said its second-quarter net profit nearly doubled from a year earlier due to strong demand for notebook computers. Compal reported a net profit of NT$6.44 billion (US$200.9 million) for the three months ended June 30, up from NT$3.24 billion a year earlier and beating analysts' expectations. Revenue rose 78% to NT$217.06 billion from NT$121.90 billion a year earlier.

Write to Lorraine Luk at lorraine.luk@dowjones.com

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