Gemtek reports discouraging results for 2013, warns sector

By Ted Chen , The China Post

TAIPEI, Taiwan — Gemtek (正文) yesterday reported discouraging operating results for the first three quarters of the current year, accumulating consolidated revenues of NT$15.689 billion on average profit margins of 12 percent, while yielding a net income of NT$406 million and earnings of NT$1.32 per share. After-tax net profit for the wireless broadband solutions provider in the third quarter reached NT$37.329 million, down 86.21 percent year-on-year. The company stated that over 75 percent of its revenues in the first three quarter of this year were derived from telecommunications carriers.

The company said it was facing tremendous competition from across the strait in explaining its discouraging operations results. It noted the inclement conditions for all players in the field, with most Taiwanese companies in the sector seeing sharp declines in sales due to the rise of low-cost competitors in China, and their inability to break into the immense mainland market and capitalize on the global boom in demand for smartphones and cloud computing. Consequently, under heightened competition, the company’s revenues derived from set-top boxes (STB) and PC Wi-Fi modules have not resulted in expected improvements. The sector’s woes extends to longtime sector leaders, with Cisco and Alcatel-Lucent both announcing major layoffs earlier this year, said Gemtek.

Most notably, company Chairman Chen Hong-wen (陳鴻文) stated that it is critical for Taiwanese companies to re examine their operating strategies and procedures to cope with the rapidly evolving solution specifications demanded by major European and American clients. In the past, companies would have had one to two years to fulfill specification changes; however, companies now must produce updates on a quarterly basis, said Chen, adding that most Taiwanese companies are not equipped to do so.

In light of changing market conditions, the company has initiated a major reallocation of its resources, assigning only one-third of its personnel to the continued development of current product lines, while another one-third has been tasked to devise new solutions for the fledgling cloud computing sector and next generation long-term evolution (LTE) mobile broadband networks.

The company expressed an upbeat outlook on prospects for forthcoming fourth-generation (4G) and LTE networks, with a global userbase expected to exceed 900 million by 2017, while mobile subscribers in Asia are expected to see the most explosive growth, with 41 percent of its population, or 375 million users, anticipated to migrate to 4G or LTE networks by 2016.