UPDATE 1-Taiwan's Quanta issues optimistic PC outlook after flat Q2 profit
* Expects H2 laptops shipments to grow 5 to 7 pct on year
* Expects Q2 PC shipments to grow 10 pct on quarter
* Shares rise 1.1 pct as benchmark closes flat (Adds company comment, context)
By Michael Gold
TAIPEI, Aug 14 (Reuters) - Taiwan's Quanta Computer Inc , the world's largest contract manufacturer of personal computers (PCs), expects laptop PC shipments to grow slightly in the second half of 2014 from a year earlier thanks to companies replacing old computers.
Quanta, which earlier on Thursday reported flat quarterly profit short of analyst estimates, expects to ship 5 to 7 percent more laptops in July-December. It also said overall PC shipments would grow 10 percent in the third quarter over the second.
The rise comes as the global PC market shows signs of "rebalancing" after two years of decline, brought about by the popularity of tablet computers, said Quanta President and Vice-Chairman C. C. Leung.
"We're seeing the trend of industrial PC replacement in tandem with the increased popularity of new types of consumer-based PCs" such as laptops with detachable keyboards, Leung said during a press conference called after the company reported earnings.
Quanta, which assembles computers and iPods for Apple Inc , reported second-quarter net profit of T$4.07 billion ($135.69 million), versus a T$4.52 billion mean estimate of 18 analysts polled by Reuters. Last year, second-quarter profit was T$4.02 billion.
Shares of Quanta closed up 1.1 percent ahead of the earnings release, against a flat TAIEX index.
To reduce the impact of falling PC demand, Quanta has branched out into next-generation devices such as wearables. It will assemble at least 70 percent of Apple's first smartwatch due for release in the coming months, a person familiar with the matter told Reuters.
It is also manufacturing more servers capable of remotely storing huge amounts of data for companies such as Facebook Inc .
But just as diversification may begin to pay off, Quanta could see its PC fortunes turn around as the global market has shown signs of stabilising recently.
Researcher Gartner reported an end to two years of market contraction by reporting neither growth nor contraction in the in the second quarter, and chip maker Intel Corp forecast a jump in third-quarter revenue on replacement demand.
Even PC brand Acer Inc, which has fallen in the ranks in recent years, reported two straight quarters of net profit this year after a string of losses.
But clouding the outlook is rival PC assembler Pegatron Corp , which forecast third-quarter laptop shipments to contract by 5 to 10 percent from the previous three months, citing continued weakness in the market. (Editing by Christopher Cushing)