Tablet cannibalisation devours Compal profits

Compal Electronics has posted a massive 58.96 percentage decline in profits after being hit by the shift towards tablets at the expense of notebooks.

Although tablets are usually seen as a more direct replacement of just the netbook, the world’s number one ODM (original design manufacturer) for notebooks has taken a significant knock in profits in its first quarter year on year results.

Net income came to $120.8 million in the first quarter of 2011, as compared to $295.1 million in the same period last year, and $159 million the previous year, with the cannibalisation of the notebook market symptomatic of a real sea change towards tablet production and away from more traditional devices. Figures are in US dollars.

And clearly this is bad news for Compal, a firm which accounts for 95 percent of notebooks worldwide.

Indeed the firm’s president, Ray Chen appears certain that it is the rise of the tablet which has dented it profits.

“We believe cannibalisation from tablets is there and it’s really a problem for the notebook market,” Chen reportedly said at a stock exchange filing yesterday.

So while Chen expects a ten percent increase in shipments of notebooks in the next quarter shipment expectations for the rest of the year have fallen from a forecasted 55 million units to 48 million.

One of the reasons for the  drop in predicted shipments of notebooks is due to a large change in orders from  one of its main clients Acer, due to a reported change of personnel.

In other markets the firm hopes to hit predictions of shipping 3.8 million tablets, LCD TVs and two million all-in-one computers during this year.