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Goldman Sachs issues warning on Asustek's margins

Goldman Sachs issues warning on Asustek's margins

Taipei, Aug. 13 (CNA) U.S. brokerage Goldman Sachs has cut its price target for shares of Asustek Computer Inc. because the challenging PC outlook is expected to erode the Taiwanese computer maker's operating margin. In a research note dated Aug. 9, Goldman Sachs lowered the stock's price target to NT$210 (US$6.99) from NT$220 and kept its "sell" rating while cutting its estimates for Asustek's earnings per share by 3 percent for 2014 and by 5 percent for 2015. "We believe the challenging PC industry outlook, especially consumer (segment), may continue to offset Asustek's strength in product design and strategic collaboration with key partners such as Intel and Microsoft, pressuring its industry-leading operating margin of 4.5 percent," said Goldman Sachs analyst Robert Yen. The analyst expected the weakness of the consumer PC market and Asustek's low margins on tablets -- driven by its production of the low cost Nexus 7 for Google -- to continue into 2014, further hurting profits. He also warned that Asustek's earnings would face even greater pressure next year if it failed to improve its commercial PC and smartphone business quickly enough. Asustek shares had risen 1.96 percent to NT$234 as of 12:46 a.m. Tuesday in Taipei. At an Aug. 9 investor conference, Asustek Chief Executive Officer Jerry Shen said the PC vendor will team up with U.S.-based software giant Microsoft Corp. and chipmaker Intel Corp. to introduce new models to consumers. Shen said the new products, to be unveiled next month, were not only aimed at seizing market share but also at boosting global demand and expanding the world's PC market pie. In the second quarter, Asustek's market share fell to 6 percent from 6.8 percent in the same period of last year after its shipments fell 20.5 percent to 4.59 million units, according to industry research firm Gartner Inc. Despite the falling PC shipments, Japanese brokerage Nomura Holdings Inc. said Asustek has prepared itself for the slump in the PC industry by expanding its business to tablets and smartphones. Nomura said that Asustek, the world's third-largest tablet maker, will improve both the scale and margins of its tablet business because it has developed its own tablet brand. In addition, Asustek has seen step-by-step improvement in the smartphone market, with the company planning to launch mainstream products in the fourth quarter of 2013 and making moves to cooperate with operators, the brokerage firm said. (By Jeffrey Wu)


Updated : 2021-09-21 17:31 GMT+08:00