Compal in Talks to Buy U.S., Taiwan Targets as PCs SlumpTim Culpan
Compal Electronics Inc. is in talks to buy companies in Silicon Valley and Taiwan as the contract manufacturer embarks on “aggressive” acquisitions to reduce its reliance on notebook computers.
U.S. targets include a provider of network download software and a developer of 3-D printing technology, Chief Executive Officer Ray Chen said in an interview. Compal is also set to buy a stake in a Taiwan-based industrial personal-computer maker by the end of this year, he said, declining to name targets.
Compal is withstanding a slump in the global PC market by shifting more contract production to tablet computers and smartphones. Chen purchased a minority stake in Avalue Technology Inc. last year as part of a strategy to boost sales of industrial computing hardware and software in health-care, sports and fitness.
“Our intention is to invest and take more aggressive M&A into the new category,” Chen said at the company’s Taipei headquarters Monday. Compal likely will become the second-largest shareholder after the founders in the U.S. targets, before possibly increasing its stake, he said.
One target makes software to speed downloads for applications that analyze large amounts of data. Another provides technology that allows products to be prototyped using 3-D printing, Chen said. The deals would be “several million” U.S. dollars each, he said without being more specific.
Compal had NT$75 billion ($2.4 billion) in cash and equivalents at the end of last year and has no plans to conduct share buybacks, Chen said.
Shares of Compal were unchanged at NT$27.05 at the close, after dropping as much as 1.7 percent earlier in Taipei trading. The benchmark Taiex index fell. The stock has climbed 22 percent this year, outperforming a 3.6 percent gain in the Taiex.
Compal is the largest contract manufacturer of notebooks after local rival Quanta Computer Inc. The company’s customers include Lenovo Group Ltd., Hewlett-Packard Co. and Dell Inc.
Non-PC products accounted for 23 percent of sales last year, with Compal expecting that to pass 30 percent this year.
Global PC industry shipments fell 6.7 percent to 68.5 million units in the March quarter, market researcher IDC said in a statement Monday.
Compal’s move beyond PCs has shown mixed success, with the company landing some orders to make Apple Inc.’s iPad mini and tablets for Amazon.com Inc. Its smartphone client list is limited to smaller players such as HTC Corp., Microsoft Corp.’s Nokia business, and Sony Corp.
Winning orders from Micromax Informatics Ltd., the biggest India-based smartphone maker, and China’s Coolpad Group Ltd. will help double phone shipments to 35 million this year, while notebook sales volume will post only small growth to about 44 million, he said. Compal’s smartphone sales will outpace notebooks next year, Chen said.