By Eva Dou
BEIJING -- Foxconn Technology Group will soon release its first quarterly results since its acquisition of Sharp Corp., with the embattled Japanese company's losses expected to drag down earnings despite the new iPhone 7's boom.
The earnings of the Taiwanese contract gadget maker -- known formally as Hon Hai Precision Industry Co. -- are closely watched in the hardware industry as a leading indicator for Apple Inc., its largest client. Apple projected last month it would return to growth in the current quarter due to strong sales of the iPhone 7, which Foxconn began producing months before the device's September launch.
But Foxconn's third-quarter results, due out in the coming week, are expected to be weighed by losses at Sharp, which it acquired halfway through the quarter. Sharp reported a net loss of Yen17.9 billion ($170.8 million) for the July-September quarter. A portion of that loss will be reflected in Foxconn's result. Foxconn is the world's biggest smartphone assembler by shipments and revenue.
Analysts are expecting a modest profit decline for Foxconn: the average net profit estimate of nine analysts polled by Capital IQ was 33.3 billion New Taiwan dollars ($1.1 billion), down from NT$37.9 billion a year earlier. Due to the practice of monthly revenue disclosure in Taiwan, Foxconn has already announced its revenue for the quarter: NT$1.074 trillion, up from NT$1.066 trillion a year earlier.
Sharp, which remains listed on the Tokyo Stock Exchange, said Tuesday that it expects to return to profitability by the second half of its fiscal year, which ends March 31. Foxconn is under pressure to stem Sharp's losses quickly: The Taiwanese company has built a reputation with investors as a stable, efficient company that increases profits year to year, in times both fat and lean.
Foxconn, which trades on the Taiwan Stock Exchange, will likely report its earnings late in the week. The famously secretive company doesn't publicize its earnings release dates, hold investor conferences, or give sales projections.
Foxconn completed its $3.8 billion acquisition of Sharp in August, after years of tumultuous negotiations and last-minute hitches that almost derailed the deal. Sharp's advanced flat-screen panel business fits into Foxconn's strategy to expand into high-end components -- a more lucrativebusiness than electronics assembly.
Foxconn has said it would help Sharp speed its efforts to mass-produce organic light-emitting diode, or OLED, displays, a technology that holds promise for next-generation gadgets with flexible screens. Apple is considering adopting this technology for iPhones as early as next year, The Wall Street Journal has reported.
But Sharp's new chief executive, Tai Jeng-wu, said Tuesday he hasn't yet decided if his company will fully commit to OLED or stick with more widely used liquid-crystal displays.
While manufacturing devices for Apple is still Foxconn's largest source of revenue, the Taipei-based company has increasingly diversified into other high-tech fields ranging from telecom infrastructure, to robotics and e-commerce.
Write to Eva Dou at email@example.com
(END) Dow Jones Newswires
November 07, 2016 02:48 ET (07:48 GMT)
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