Wistron shares jump on Facebook data center report

staff writer

Dealers said that shares of Wistron Corp., an ODM service provider for notebook computers and personal computer peripheral products, rallied yesterday morning after local media reported that Facebook plans to set up a cloud-technology-based data center in Taiwan.
Already a server supplier to Facebook’s data center in North Carolina of the United States, Wistron is expected to secure additional large orders from the U.S.-based social network due to the presence of the new data center planned in the Central Taiwan Science Park, they said.
As of 11:27 a.m., Wistron shares had risen 4.42 percent to NT$37.80 (US$1.26) with 32.93 million shares changing hands, while the benchmark weighted index was up 0.06 percent at 7,625.96 points.
The report said the planned Facebook data center is expected to bring billions of Taiwan dollars worth of server orders to the island.
“To my knowledge, Wistron belongs to the Facebook camp in terms of server supply. If the data center report turns out to be true, Wistron’s bottom line will be boosted by a relatively high gross margin from cloud-based server manufacturing,” Horizon Securities analyst Benson Huang said.
Market observers said the gross margin for cloud-based server production stands at about 20 percent, compared with a 3-4 percent in notebook computer manufacturing.
“So buying in Wistron shares is strong on heavy trading volume this morning, although the broader market appears lackluster,” Huang said.
In addition, Huang said many investors have embraced high hopes that Wistron will benefit from rising demand for ultrabook computers in the fourth quarter as the Christmas season is approaching.
“Wistron is a manufacturing arm of PC vendor Acer Inc. Investors are buying Acer’s argument that it will launch two new ultrabook computer models in November to boost sales during the upcoming Christmas holiday,” Huang said.
The market expects Wistron’s sales in November to approach the company record of NT$63.3 billion set in September, based on strong sales forecasts for ultrabook computers and Research In Motion’s Blackberry phones.
According to RIM, its Blackberry phone shipments are expected to post double-digit growth in the fourth quarter. Wistron is in RIM’s supply chain.
Huang said Tuesday’s buying also reflected bargain hunting as investors try to take advantage of a recent sell-off in the local bellwether high-tech sector amid concerns over slowing global demand.
“But investors should be aware of possible technical hurdles at around NT$40 in the short term if the stock continues to move higher,” he said.