Pegatron Technology has announced net losses of NT$559 million (US$19.38 million) for the first quarter of 2011 with EPS of negative NT$0.25 and gross margin of only 1.8%, all historical lows.
Pegatron president and CEO Jason Chang pointed out that the losses were mainly caused by rising labor and material costs in China, while the rising exchange rate in Taiwan and China's currencies also had some share of the losses.
For the second quarter, Pegatron expects to see a 25-35% drop in its communication product shipments, but as its notebook shipments (including netbooks and tablet PCs) are expected to rise 20-30% sequentially, while consumer electronics shipments are also expected to rise by the same percentage, the company is expected to see up to 10% sequential growth in revenues.
Pegatron had revenues of NT$85.62 billion for the first quarter, down 19% on quarter, while revenues for 2010 dropped 7.8% on year to only NT$435.49 billion with net profits of NT$6.21 billion, a drop of 8% on year, EPS of NT$2.73 and average gross margin of 3.6%.
Market watchers were originally optimistic about Pegatron's performance in 2011 as the company landed orders for CDMA iPhone 4 from Apple, but as the company reported losses for the first quarter of 2011, the market watchers are turning conservative about CDMA iPhone 4 shipments in the future as volumes may not be as strong as expected.
To improve the situation, Pegatron is already in negotiations with its clients about raising manufacturing quotes and has already received good feedback, Chang noted.
Pegatron shipped about 17 million notebooks in 2010 and is forecast to ship 20 million notebooks in 2011 with tablet PC shipments to reach about two million units. Meanwhile, Pegatron originally expected to ship 10 million CDMA iPhone 4s in 2011, but sources from upstream component makers pointed out that Apple's orders already saw a significant reduction and the volume is estimated to drop to only five million units.
As for the component shortages caused the Japan's earthquake, Chang pointed out the component shortages currently only have a limited impact on its shipments in the second quarter due to seasonality and its current component inventory is still able to last for another two months.
As for the investment in Chongqing, China, Chang pointed out that the company will minimize its investment budget for the plant, since the company will not need the capacity from the Chongqing plants in the short term as the company still has some empty utilization.
In additional news, Asustek also announced its consolidated revenues at NT$73.91 billion for the first quarter with net profit of NT$3.42 billion and EPS of NT$5.5. The company's revenues for 2010 reached NT$321.2 billion, up 29% on year with gross margin of 13.6% (up from 11.6% in 2009), net profit reached NT$16.48 billion and EPS NT$26.72.