Taipei, June 29, 2007 (CENS)--Asustek Computer Inc. will spin off its contract-manufacturing unit by the end of this year as part of its plan to boost revenue by resolving the conflict between its brand-name operation and its contract-manufacturing operation, according to the company`s top executive.

Asustek Chairman Jonney Shih pointed out that after the separation the contract-manufacturing operation will dedicate itself to the goal of becoming the world`s No.1 electronics-manufacturing service provider. He noted that in a competitive industry like contract PC manufacturing the only choice is being No.1 player.

The company`s customers, particularly those operating brand names, have criticized its double identification and threatened to reduce orders to it. The situation has been complicated by its reduced shipments of Sony PS3 game consoles, raising the possibility that its revenue for the second quarter will drop 40% from the first quarter to NT$140 billion (US$4.2 billion at US$1:NT$33).

However, Shih stressed that his company`s projected revenue goal for this year of NT$750-800 billion (US$22.7-24 billion) is reasonable. Last year, the company raked in NT$600 billion (US$18 billion).

Based on Shih`s projection, institutional investors estimate the company`s revenue projection for the second half should fall on the NT$380-430 billion (US$11.5-13 billion) range. The company`s revenue for the second quarter is estimated at NT$370 billion (US$11.2 billion).

The projected annual goal will make Asustek the world`s No.3 electronics-manufacturing service provider, after Hon Hai Group`s projected NT$2 trillion (US$60 billion) and Flextronic International`s NT$1.2 trillion (US$36 billion).

It is understood that Asustek`s contract-manufacturing operation will accelerate its global presence as part of its scale-expansion plan. Accordingly, the company is assessing plans to open facilities in Brazil, Vietnam and India. It is now running factories Mexico and the Czech Republic.

Shih analyzed that contract manufacturing operation is different from brand-name operation, stressing production scale and capacity, capital, vertical integration as well as management. He added that after the separation the company`s contract-manufacturing operation will be free from the burden of confronting its brand-name operation.

Although the company`s revenue for the second quarter will likely drop at an unexpectedly huge rate, some institutional investors estimated that Asustek`s brand-name operation will likely post earnings far exceeding expectations, which put the earnings at NT$4.6 billion (US$139 million) for the second quarter.

As a result of the seasonal factor, the company`s contract-manufacturing revenue for May alone recessed 18.4% from a month earlier, to NT$42 billion (US$1.27 million). However, the May result was up 32.5% year-on-year. Throughout the first five months this year, the company had total revenues of NT$319.1 billion (US$9.6 billion), increasing 99.7% from the same period of last year.

Asustek has projected to ship 63 million motherboards throughout this year, compared with last year`s 55.5 million boards.

(by Ken Liu)