Quanta Computer, the world's largest contract notebook PC maker, and top electronics parts maker Hon Hai are set to post stronger quarterly profit as global demand grows for laptops and electronics goods.
The two Taiwanese companies are set to benefit from individuals buying more PCs as well rising orders from major computer names, pointing to a strong second half of the year, analysts said. "In the second quarter PC demand was stronger than expected, and as industry leaders (Quanta and Hon Hai), they have outperformed market growth since they are constantly diversifying and gaining market share," said CLSA analyst Vincent Chen.
Analysts will be looking for any changes in strategy at Quanta Computer Inc, after after its chief executive, Michael Wang, resigned last week following a disagreement over the company's direction. C.C. Leung, one of the company's co-founders, replaced him.
Quanta which counts Hewlett-Packard Co, Dell Inc and Apple Inc as its major customers, is expected to post a second-quarter net profit of T$3.434 billion (US $104 million), according to a mean forecast from eight analysts polled by Reuters Estimates. That would be up 63 percent from a year ago and slightly higher than the T$3.403 billion it earned in the first quarter ended March.
Its smaller rival Compal Electronics Inc has already posted a forecast-beating 92 percent rise in second-quarter earnings. Quanta's full year net profit is seen rising to T$15.01 billion, up 16 percent from 2006.
Hon Hai, which makes consumer electronics and parts for the world's most well-known brands - such as Apple's popular iPod music player - has branched out to make new products with fatter margins, helping it maintain its growth. "As Hon Hai continues to grow, it has to carry out acquisitions to strengthen its supply chain, and these investments will benefit the company in the long run," said CLSA's Chen.
The company, with a market value of around US $43 billion, makes cellphones for Nokia and networking devices for Cisco Systems Inc Goldman Sachs' analyst Henry King rates Hon Hai a "buy" with a target price of T$325.00, about 15 percent above the company's Friday closing share price. Hon Hai shares rose 22 percent since the start of this year, based on Friday's close.
Established in 1974, Hon Hai has subsidiaries such as Foxconn Technology Co Ltd, which makes computer components, and Hong Kong listed Foxconn International Holdings, which makes mainly mobile phones. It has factories in China, Mexico, Hungary, India, Finland and the Czech Republic. It competes with Singapore-based rival Flextronics International Ltd, which said in June that it planned to acquire California-based Solectron Corp.