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Thursday, May 16, 2013

Apple wait may put Hon Hai's profit margins under pressure

Hon Hai Precision Industry's profits may remain weighed down in the second quarter, hurt by a dearth of new products in the coming months from top client Apple Inc.

The world's largest electronics contract maker's net profit eased last quarter from a record high as sales of Apple's iPhone and iPad slowed.

The Taiwanese company, which draws an estimated 60 to 70 percent of its revenue from assembling gadgets and other work for the California-based tech giant, has been struggling to increase revenue and margins in a smartphone market increasingly dominated by Samsung Electronics Co Ltd.

Hon Hai also faces growing competition from local rival Pegatron Corp, which wants to grab more orders from Apple.

Hon Hai reported on Tuesday a net profit of T$16.35 billion in January to March, below a median forecast of T$18.76 billion in a Thomson Reuters I/B/E/S poll of 13 analysts.

The result was up from T$14.92 billion in the same period last year but down from T$36.97 billion in the previous quarter. Both figures were before the company adopted a new accounting standard.

Shares of Hon Hai, which have lost about 10 percent so far this year, closed down 0.5 percent before the results announcement, versus a flat broader market.

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