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Asustek's Branded Operation Nearing Profitability After Restructuring

Feb 24, 2014 | By Ken Liu

Asustek Computer Inc.'s branded operation saw revenue hit record high of NT$421.3 billion (US$14 billion) last year after spinning it off from its contract-manufacturing service in 2011.

Its after-tax net income for 2013 was NT$21.4 billion (US$715 million), or NT$28.9 per diluted share, down 4% from 2012 to become the second highest since the spin-off.

The company ended Q4, 2013 with branded operation revenue hitting new high of NT$119.4 billion (US$3.9 billion), and after-tax net income of NT$5.6 billion (US$189.7 million), or NT$7.7 per diluted share, surging 15% quarter on quarter but down 3% year on year. Operating profit margin stayed at 4.5%, topping market expectations.

Company chief executive officer (CEO), Jerry Shen, predicts the company's branded operation revenue to further grow and operating profit margin to remain at 4.5% this year. Nevertheless, some industry executives feel the margin is low for a branded supplier regardless of the reality that the PC market, in which Asustek is still a big player, has stagnated for many years due to the rise of mobile computing devices.

This year, smartphone is set to be one of the company's profit makers this year, with the company predicting its smartphone business to begin making money this year with its plan to ship five million smartphones, after losing last year NT$1 billion (US$33.3 million).

Industry executives expect patent lawsuits filed by big players to challenge Asustek this year given the intense  competition in the fast growing smartphone market worldwide; while Shen is confident that the  the company is ready to cope for the company is now among the world's top-10 holders of essential intellectual properties (IPs) on mobile devices, including 3G, 4G, and even 5G handsets, after 10 years of development.

Asustek plans to pitch its ZenFone-series smpartphones in April in Europe, Asia, and South America. In June, it will market its PadFone X in the United States in cooperation with telecom carrier AT&T.

With laptops to be another revenue earner this year, Shen says that the company will ship two million to four million of its ASUS EeePC T100 and ASUS EeePC T200 combined, which are well received by consumers for combining laptop and tablet PC, this year, and that all  500,000 T100s stocked at retailers late last year were completely sold.

Affected by seasonal factor, the company predicts the shipments of its top three products to decrease in the first quarter, with laptop to drop 12.7% from the previous quarter to 4.8 million units, tablet PC to contract 33.3% sequentially to 2.4 million units, and motherboard to fall 3.8% quarter on quarter to five million units.

Considering apparent reduction in the company's tablet shipment recently, industry executives project the company's branded operation revenue for the first quarter at NT$95-100 billion (US$3.1-3.3 billion), for  a 5-10% drop from the same quarter of 2013 and a 16-20% decrease from the previous quarter. (KL)

Asustek's Post-2011-Spinoff Performance

Operation
category  \  year
2011
2012
2013
2014
Branded operation revenue
NT$350.2bn
NT$413.1bn
NT$421.bn
Planned to grow further




Maintain at 4.5%
After-tax net income
NT$16.5bn
NT$22.4bn
NT$21.4bn
EPS
NT$21.99
NT$29.79
NT$28.9
Operating profit margin
5.1%
5.3%
4.7%
Source: Asustek


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