Falling IPad Mini Demand to Push Pegatron Electronics Sales Down

Pegatron Corp. (4938), the Taipei-based maker of Apple Inc. (AAPL) devices, forecast its biggest drop in consumer-electronics revenue in six quarters as iPad Mini demand falls.

Second-quarter revenue for the business, which also makes Microsoft Corp. (MSFT)’s Surface tablet, will drop 25 percent to 30 percent from the previous three months, Pegatron said today. That’s the most since a 37 percent decline in the fourth quarter of 2011.

Pegatron, spun off from Asustek Computer Inc. (2357) in 2010, joins Hon Hai Precision Industry Co. (2317) in facing a decline in orders from its largest customer. Apple last month reported its first profit drop in a decade amid shrinking margins and competition from Samsung Electronics Co., and said it will start rolling out new products later this year.

A decline in revenue from the iPad Mini “is more on demand, while price has been stable,” Pegatron Chief Executive Officer Jason Cheng said. “Not just tablets, also e-books and games consoles, almost every item is moving in a negative direction.”

Carolyn Wu, a spokeswoman for Apple in Beijing, declined to comment. Pegatron shares dropped 0.5 percent to close at NT$48.95 today in Taipei before the announcement, stemming its climb this year to 30 percent.

Hon Hai

The iPad Mini accounts for more than half of Pegatron’s consumer-electronics revenue, and the iPhone 4S contributes a majority of sales in the communications division, Cheng said.

“This is a bigger drop than we’d expected,” said Vincent Chen, who rates the company buy at Yuanta Financial Holding Co. in Taipei. “We’re seeing strong indications from the supply chain that demand for iPad Mini will now fall 20 percent to 30 percent from the first quarter, instead of an earlier 15 percent estimate.”

Consumer electronics accounted for 36 percent of Pegatron’s revenue in the first quarter, an increase from 10 percent two years earlier. Its computing division, which makes notebook and desktop PCs, remains the largest contributor at 40 percent and will post a 5 percent to 10 percent increase in shipments for the quarter ending June 30, the company said.

The communications unit will post “flat” revenue growth this quarter, Pegatron said. The business, which also makes modems and set-top boxes, accounted for 24 percent of first-quarter revenue.

Hon Hai, the world’s largest maker of electronics products including the iPhone 5 and iPad, last month reported a 19 percent drop in first-quarter revenue, the most in at last 13 years. The company is due to report first-quarter net income by May 15.

Pegatron today reported contract-manufacturing revenue last quarter rose 31 percent to NT$195 billion ($6.6 billion), with profit for the unit almost doubling to NT$2.31 billion.

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

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.

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