Industryweek 5663 Hon Hai

Taiwan's Hon Hai Set to Spin Off Units

June 26, 2013
"The recent sell-off is not triggered by our business outlook; there's nothing changed regarding our fundamentals," Hon Hai Chairman Terry Gou said, adding that the company has been working to cut costs and diversify its businesses.

NEW TAIPEI CITY, Taiwan—Taiwan's Hon Hai Precision said today it plans to spin off some units as its founder unveiled measures to battle global sluggishness and falling share prices.

Hon Hai (IW 1000/25), the parent company of Foxconn (IW 1000/611), saw its sales in the quarter ended March 31 fall 19% from a year earlier to Tw$809 billion (U.S. $26.97 billion) as orders from its biggest client, Apple (IW 500/9), slowed.

In reaction to the slowdown, a number of foreign institutional investors have ditched Hon Hai, with their shares falling from 48.1% to 40.2% since early this year. Hon Hai share prices dropped from Tw$88.9 to a low of around Tw$70 last week.

But in a shareholders meeting, founder and chairman Terry Gou called on investors to have faith in Hon Hai, the world's biggest electronics contract manufacturer.

"The recent sell-off is not triggered by our business outlook; there's nothing changed regarding our fundamentals," Gou said, adding that Hon Hai has been working to cut costs and diversify its businesses.

The conglomerate—the world's largest maker of computer components—assembles products for Apple, Sony (IW 1000/39) and Nokia (IW 1000/86).

Connector Unit Among Spinoffs

Gou said he plans to spin off some of the 26 companies controlled by Hon Hai, including the unit that produces connectors—a device for joining electrical circuits together.

"Some of our parts and components manufacturing companies are very competitive, " Gou said. "They are definitely world-class. Their genuine value is not found by many under the present circumstances. This is part of Hon Hai's organization restructuring efforts."

With the structural adjustment measures, Gou said he can pledge to investors that Hon Hai’s 2013 profit "will go beyond that of last year."

Last week the firm announced that it aims to hire up to 3,000 new employees to develop devices and software for Mozilla's Firefox operating system as it seeks to diversify from its core manufacturing services.

Gou also mentioned that an investment deal discussed last year with struggling Japanese electronics giant Sharp (IW 1000/115) was still on the cards, though Hon Hai was in no rush to seal the deal.

"The deal with Sharp is still alive," Gou said. "The biggest problem is that the past year, their chief negotiator has changed four times. What can we do about that? But we're in no rush. Time is on our side."

Hon Hai's net profit surged 16.1% to Tw$94.76 billion in 2012, while revenue rose 13.1% to Tw$3.9 trillion.

Copyright Agence France-Presse 2013

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