* Q3 net up 58 pct from year ago on iPhone 5 and iPad mini
* Concerns over Apple's long-term growth capped Hon Hai's
* Profit helped by reversal of charge for Sharp deal that
didn't go through
By Clare Jim
TAIPEI, Oct 31 Shares of Taiwan's Hon Hai
Precision Industry jumped on Wednesday after the main
manufacturer of Apple Inc's products posted a sharp
rise in quarterly net profit, boosted by new gadget launches by
the California giant.
But strong early share gains were later tempered by investor
caution over Apple's long-term growth prospects, analysts said.
Hon Hai, the assembler of both iPhone 5 and iPad mini
launched in September and October, respectively, started mass
production for the products in late August.
The company reported nine-month profit late on Tuesday of
T$57.8 billion, 24 percent higher than the year-ago period.
Net profit in July-September was T$30.3 billion ($1.04
billion), according to Reuters and analyst calculations, up 58
percent from a year earlier. Profits in the quarter were 140
percent higher than the previous three months.
Hon Hai said in a brief statement that it had achieved a
notable market share gain "in the midst of the European led
global economic uncertainty and potential industry shrinkage,"
adding, however, that it could not clearly predict future
It did not give further details in a statement late on
Tuesday to the Taiwan stock exchange or in a subsequent
statement on Wednesday.
As of 0 310 GMT, shares of Hon Hai were up 1. 14 percent,
outperforming a 0.5 6 percent fall in the broader market,
but easing from a 3.4 percent gain at th e op ening.
"The rise we saw this morning was not much given the strong
Q3 figures; in fact many foreign investors have been selling Hon
Hai shares recently," sa id Vi ncent Chen, analyst at Yuanta
"Many foreign investors who bought Hon Hai were buying into
Apple's future, but they're now showing concerns over Apple's
Last week, Apple Inc delivered a second straight
quarter of disappointing results and iPad sales fell well short
of Wall Street's targets, but investors said they would focus on
the year-end holiday quarter.
Analysts have generally expected Hon Hai's shipments to
Apple to increase in the fourth quarter as yield rates of iPhone
5 and iPad m inis i mproved from the initial production period.
In a trading note, Barclays Capital analyst Kirk Yang said
he expected fourth-quarter consolidated sales to grow by 14
percent from a year ago due to strong Apple product shipments.
"Hon Hai remains our top pick into the (fourth quarter
through first quarter 2013) iPhone 5 and iPad mini product
cycle," Yang said.
Hon Hai's strong results in the third quarter were also
boosted by higher subsidies from Apple and a reversed charge o f
T$4.5 billion from investment in Sharp. The Taiwanese
company had agreed to buy 9.9 percent of Sharp for $852 million
in March, but it said later in August that the two companies
agreed Hon Hai did not have to honour the purchase because
Sharp's shares sharply plunged after the March agreement.
While neither Apple nor Foxconn has said what the
cost-sharing arrangements, if any, are between the two
companies, some analysts assumed that Apple is paying higher
fees for iPhone 5 and also is covering part of the cost of
Foxconn Technology Group, the trading name of Hon Hai,
announced in mid-February it had raised wages for workers by 16
to 25 percent. In late March, it reached an agreement with Apple
to hire tens of thousands of new workers to reduce overtime work
as it fought perceptions of its sprawling plants in China as
"Foxconn's margin improved owing to Apple's subsidies," said
Chen, analyst at Yuanta Securities, "but the subsidy level is
hard to predict in nature and it may vary each quarter."