Japan component shortage destroys Pace shares

The world’s largest producer of set top boxes, Pace, has been hit hard by the shortage of components from Japan – with shares dropping by 40 percent.

As TechEye has reported there are severe problems with component shortages in many sectors due to the major disruption caused by the Japan quake. It appears that shareholders at Pace are feeling the consequences first hand.

The firm warned that its full year profits were likely to fall way short of its own forecasts, with operating profit now expected to be reduced to around $150-170 million.

The firm says that the problem has stemmed from its building of inventory and purchasing of components ahead of schedule to “ensure that it can deliver on customer orders within a tight supply chain environment”, meaning that it has incurred “increased costs”.

With production levels still seemingly a while off returning to normal level Pace confirmed that it was the Japanese Tsunami which “has further exacerbated the supply chain environment” and “increased risk for the year”.

Supply problems could be slowly working their way to the customer, as Pace makes set top boxes for Sky. Murdoch’s empire could in turn be hit by the shortages, according to one shareholder speaking to TechEye who lost £18,000.

British firm Pace’s Chief Exec Neil Gaydon said in a statement that “despite revenues and product shipments being on track, we have made a disappointing start to the financial year with our profitability”, also pointing to a lack of demand for its Pace Networks products.

Gaydon says that the company has “taken action” and is “making changes to improve our second-half performance and beyond and to ensure we return to our 8 per cent operating margin target.”

Pace, which builds high definition, digital and 3D set tops has set its sights on driving its operating margins up from 5.5 percent in the first half of this year to the target of eight percent in the second.

According to the Financial Times, shares were down about 39 percent, or 59.9p, at 93p in trading today following the profit warning.