Rugged computer demand to lift Getac sales next year

• By Meryl Kao / Staff Reporter

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Getac Holdings Corp (神基控股) yesterday said it expects revenue next year to grow 5 percent to 10 percent year-on-year, supported by robust growth in its rugged PC business, despite weak PC demand weighing on its consumer electronics mechanical components business.

Getac’s revenue in the first three quarters increased 10.7 percent year-on-year to NT$32.25 billion (US$982.09 million). The company makes rugged computers and supplies mechanical components for consumer electronics, vehicles and aerospace applications.

Last quarter, electronic products — mainly rugged notebooks and tablets — were Getac’s largest revenue contributor at 47 percent, followed by mechanical products at 39 percent and aerospace fasteners at 13 percent, Getac chairman and CEO James Hwang (黃明漢) told an earnings conference in Taipei.

Getac Holdings Corp chairman James Hwang attends the company’s quarterly investors’ conference in Taipei on May 15.

Photo: CNA

Mechanical products include composite mechanical components, mainly parts for notebook computers and other consumer electronics, as well as automotive components, Hwang said.

Growth next year is expected to be supported by continued defense demand and new business development, he said.

The company has secured two new orders from US and European customers for rugged-computer-based ground control solutions for unmanned vehicles, which are expected to lift the business’s share of total revenue to between 5 percent and 10 percent next year, he said.

Revenue from composite mechanical components is expected to decline this year by slightly more than the previously estimated 8 percent to 12 percent due to weak notebook and consumer electronics demand, he said. The weakness is expected to extend into the first quarter of next year, he said.

Revenue from automotive mechanical components, by contrast, is expected to grow by slightly more than the original target of 5 percent to 10 percent, Hwang added.

To reflect surging costs of key components such as solid-state drives, Getac raised rugged computer retail prices in the first quarter, prompting customers to bring shipments forward to the second quarter for fear of further price hikes, he said.

Shipments are expected to normalize this quarter, he said.

The company is considering raising prices further in the first quarter of next year if component costs remain high, Hwang said.

To address component shortages, Getac began increasing strategic inventory at the end of last year, Getac vice president of finance and accounting Vicky Hsieh (謝淑娟) said.

The company currently holds about three to four months’ worth of strategic inventory, with relatively little risk of write-downs, as the inventory can be gradually absorbed through normal operations, she added.

To meet rising demand for production capacity in Taiwan, the company would consider further expanding its Taoyuan plant, Hwang said.

Getac reported that net profit decreased 2.1 percent year-on-year to NT$1.29 billion during the third quarter. Earnings per share slid to NT$2.06 from NT$2.12 a year earlier.

Gross margin fell to 29.4 percent last quarter from 31.54 percent a year earlier, as some higher-margin rugged computer shipments were pulled forward into the second quarter, Hsieh said.

Gross margin is expected to recover to between 31.1 percent and 31.7 percent this quarter, supported by a more favorable product mix, she added.