Compal Electronics announced third-quarter consolidated revenues of NT$197.89 billion (US$6.26 billion), up 14% sequentially, profits at NT$8.69 billion, up 14% sequentially, gross margins 4.4%, net profits NT$2.18 billion, up 26% sequentially, but down 25% on year, and EPS at NT$0.50.

Compal also reported consolidated revenues of NT$76.88 billion for October 2016, representing a 0.7% increase on month and 5.18% increase on year. The company has totaled NT$624.33 billion in year-to-date revenues, down 9.01% compared with the same time in 2015.

Compal president Ray Chen noted that the company's notebook shipments are greatly impacted by Toshiba phasing out of the consumer sector, but shipments are expected to grow 5% on year in 2017 judging from its current order and shipment estimates, while overall notebook shipments will continue to slide by around 5% on year.

Rising demand for Windows 10 in the enterprise sector is the key growth driver for the notebook market currently, said Chen, adding that Compal originally expected its fourth-quarter notebook shipments to stay flat from a quarter ago, but is now forecasting to see a 5-10% sequential growth, and shipments in the first quarter of 2017 will continue to rise despite seasonality.

Currently, notebook shipments to the enterprise sector account for 45% of Compal's overall volume, but profits from the shipments account for more than 50% of the company's overall amount. Chen expects Compal's shipment proportion to the enterprise sector to continue rising in 2017.

Although Compal performed rather well in the third quarter, the company was still impacted significantly by exchange losses caused by the rising New Taiwan dollar. Compal had exchange losses of NT$822 million in the third quarter.

Compal shipped 9.5 million notebooks in the third quarter. Compal's non-notebook business revenue contribution in the first three quarters combined rose from 26% in full-year 2015 to 30%. In addition to smart handheld devices, Compal has also entered into the development of virtual reality (VR) and server products.

Because of lost orders from Toshiba, while orders from Acer and Asustek both dropped, Compal's notebook shipments in 2016 are expected to be down by over two million units on year. However, the company's gross margins will remain flat from a year ago since its shipments of high-end models such as ultra-thin and 2-in-1 products, have been rising, which increases its profits.

All Compal's clients have finished their request for quotation (RFQ) process and calculated shipment estimates for 2017, and the PC market is expected to see shipments drop within 5% from 2016, Chen noted.

As for Compal's smart handheld device business, Chen expects orders to grow slightly on year in 2017 and Compal will continue to seek new clients. Commenting on its client LeEco finding itself short on funds due to too rapid expansion, Chen said that the issue will not affect Compal much since LeEco's businesses accounts for a small portion of its revenues, and LeEco's problem is likely to be resolved in the near future.

For the smartphone business, Compal is mainly seeking new business opportunities from existing clients including LeEco, Lenovo and Sony. Compal's handset team has been developing Internet of Things (IoT) and smart wearable products and these devices are already mass shipping or will start mass shipments soon.

The server business is still at the initial investment stage and Compal has been throwing resources into related R&D and recruitment. Because of the company's late entry, shipments are low but Compal is currently looking to join the supply chains of server brand vendors. The cloud computing datacenter market will be its next target and Compal will start seeking clients in the second half of 2017, Chen added.