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HP move to keep PC assets may further boost Hon Hai's share price

HP move to keep PC assets may further boost Hon Hai's share price

Taipei, Oct. 29 (CNA) The decision by Hewlett-Packard, the world's largest personal computer vendor, to keep its PC division is expected to lend further support to Hon Hai Precision Industry's share price in the short term, analysts said Saturday. "The HP move has left many investors relieved," Value Partners Concord Asset Management analyst Henry Chen said. "HP will continue to serve as a stable revenue source for local firms, like Hon Hai, which assemble PCs for the U.S. high tech giant." Hon Hai, the world's largest contract electronics maker, generates 10 percent to 15 percent of its total revenue from its ODM services for HP. Chen said Hon Hai shares have already benefited from HP's decision, closing up almost 1 percent at NT$81.70 (US$2.74) on Friday after news of the decision emerged. "I expect the positive lead from HP to bolster Hon Hai shares in the short term as this revenue uncertainty has been removed," he said. Earlier this week, HP announced it would hold on to its PC division -- Personal Systems Group (PSG) -- after completing an evaluation of strategic alternatives that started in August. "It's clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees," HP President and Chief Executive Officer Meg Whitman said in a statement. "HP is committed to PSG, and together we are stronger." In the past five trading sessions, Hon Hai has risen about 11.3 percent on the Taiwan Stock Exchange, with foreign institutional investors buying a net 114 million shares. Chen said the strong buying interest in Hon Hai was the result of the stock's low valuation, which had been caused by concerns over weakening global demand amid the debt crisis in the eurozone. After this past week's European summit, however, where an agreement was hammered out to write off 50 percent of Greece's debt and boost the size of the region's bailout fund, the impact of the debt crisis seems to be fading, the analyst said. "In addition, hopes are high that Hon Hai's bottom line in the third quarter will focus market attention on the stock in the upcoming week," Chen said. Benefiting from a weakening Taiwan dollar and falling raw material prices, Hon Hai's gross margin is expected to be at least 7.3 percent, the level seen in the second quarter, Chen said. Hua Nan Securities Investment Management said Hon Hai is expected to post earnings per share of at least NT$1.3 for the third quarter, up from NT$1.09 recorded in the second quarter. (By Lin Ye-fong and Frances Huang)


Updated : 2021-10-20 16:11 GMT+08:00