Notebook Makers Turn Cautious

After a recent unexpected dip in orders to Taiwanese ODMs from Dell and Hewlett-Packard, Compal Electronics surprised the industry this week with quarterly results that pointed to a slowdown in demand and erosion of their already thin, single-digit margins.

The company's CEO, Ray Chen, who had been bullish about growth for the notebook sector this year, trimmed his estimate for the global notebook market to 43million to 44 million units from 47 million. Earlier this year, market watcher International Data Corp. estimated total shipments of 50 million units in 2004, up from 39.5 million last year, but it has since revised that to 47 million.

"When the second largest [notebook] maker in the world suddenly turns negative, it is a strongly negative sign with regards to the current uncertain outlook for [notebook] demand and sell through," wrote Macquarie Securities analyst Dominic Grant in a research note to clients.

Intel Corp's delay earlier this year of its next-generation notebook platform, codenamed Sonoma, has been partially blamed for dulling demand, leaving price cuts as one of the only key weapons for spurring sales. High oil prices and weaker than expected PC replacement demand were also cited by Compal.

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Industry watchers believe Quanta Computer, the largest contract maker of notebooks, is also turning more conservative on the second half. It has reportedly cut its internal target for shipments to 11 million units, down from an earlier goal of 12 million units.