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Pegatron Aims to Be Top 3 Contract Manufacturer of Notebook PCs, CEO Says

Pegatron Corp., the contract manufacturer spun off from Asustek Computer Inc., said it aims to be the world’s third-biggest maker of notebook computers within two years by targeting the world’s largest PC brands.

“Orders from the top four will make a big contribution to our growth,” Jason Cheng, president and chief executive officer of Pegatron, said in an interview at the company’s Taipei head office yesterday. “I have more engineering resources and capacity than some peers.”

Pegatron is competing against Quanta Computer Inc. and Compal Electronics Inc. to win orders from Hewlett-Packard Co. and Dell Inc. The stock has outperformed the island’s benchmark index since it began trading on the Taiwan Stock Exchange in June, helped by optimism Pegatron’s market share will rise.

“It’s possible for them to reach that target, because the trend is for the PC brands to look for other sources of manufacturing,” said Calvin Huang, a Taipei-based analyst for Daiwa Securities Group Inc., who rates Quanta “underperform” and has no rating on Pegatron. “They have more resources than their closest competitors, which is a definite advantage.”

Pegatron expects to ship about 18 million notebooks this year, Cheng said. Huang estimates Hsinchu, Taiwan-based Wistron Corp. will sell 29 million units this year and Taipei-based Inventec Co. may ship 19 million. Compal and Quanta have said they expect to sell almost 50 million units each this year.

Shares Rise

Pegatron shares have risen 13 percent from their initial offer price of NT$36. Taiwan’s benchmark Taiex index has gained 4.6 percent.

The percentage of Pegatron’s revenue from computers and motherboards will fall to about 50 percent by the end of 2011 from 71 percent in the second quarter, on increased sales of consumer electronics and communications devices, Cheng said.

Electronics and communications devices, such as games consoles and mobile phones, will each account for about 20 percent of sales, he said.

Luring the top-four brands -- HP, Acer Inc., Dell and Lenovo Group Ltd. -- is crucial to expanding the PC business as Asustek starts to allocate orders to rivals and Pegatron seeks to boost factory utilization to about 85 percent by the end of 2011, from 60 percent in the first half of 2010, Cheng said. He declined to identify Pegatron’s customers.

“Utilization is the first priority,” Cheng said. “I need to move that number up, as resources are our competitive edge.” The company has no immediate plans to make acquisitions, although it may consider buying makers of hinges, casings or materials if the “right opportunity” arises, he said.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

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