UPDATE 1-Apple assembler Pegatron sees Q3 revenue boost from new smartphones

Mon Aug 11, 2014 4:30am EDT

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By Michael Gold

TAIPEI, Aug 11 (Reuters) - Taiwan's Pegatron Corp expects revenue from assembling communication devices such as Apple Inc's next-generation smartphone to rise sharply the third quarter, damping the impact of decline in the contract manufacturer's traditional business of personal computers (PC).

The forecast comes as Pegatron shifts focus to mobile devices after enduring two years of sliding global PC demand - a move which coincided with Apple diversifying its supply chain away from Hon Hai Precision Industry Co Ltd.

Pegatron on Monday projected revenue from devices excluding PCs to rise by 20 to 30 percent from the second quarter, thanks to iPhones that are widely expected to join the trend toward larger screens. Apple, however, expects its third-quarter earnings to slightly lag analyst estimates .

The assembler also said a continued decline in the PC market, where its clients include Hewlett-Packard Co and Asustek Computer Inc, is likely to push down July-September laptop shipments by 5 to 10 percent.

"I myself was quite disappointed by our notebook forecast," Pegatron Chief Executive Jason Cheng said in a quarterly analyst conference. "But we believe 2015 should finally see a sustained turnaround for the industry."

Pegatron earlier on Monday reported April-June net profit of T$1.5 billion ($50.0 million) versus a T$2 billion average forecast of 19 analysts polled by Thomson Reuters.

That compared with net profit of T$1.39 billion in the same period a year earlier and T$2.73 billion in January-March.

Shares of Pegatron closed up 2.1 percent ahead of the earnings and forecast release, versus a 1.0 percent rise in the benchmark TAIEX index.

Pegatron, which analysts say will assemble up to 30 percent of the first wave of new iPhones, should benefit from increased presence in the Apple supply chain for the foreseeable future, said KGI Securities analyst Angela Hsiang.

"We expect 2015 sales and earnings growth to remain decent, as we project iPhone replacement demand will continue into 2015," Hsiang wrote in a research report ahead of the earnings release.

Yuanta Securities analyst Vincent Chen estimates that iPhone assembly will account for about 40 percent of Pegatron's revenue in the fourth quarter, with other Apple products contributing a further 15 percent.

The proportion of revenue from Apple has risen during a period of decline in PCs. Global PC sales were flat in the second quarter, according to researcher Gartner - an improvement from two years of gradual decline brought about in part by the emergence of tablet computers and other 'smart' devices.

(1 US dollar = 30.0000 Taiwan dollar) (Editing by Christopher Cushing)

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