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Macbook Pro lifts Quanta's Q1 revenue, but forex losses hit bottom line

Taiwanese manufacturer could drop Apple Watch due to ongoing losses, analyst says

Quanta, the major supplier of Macbooks and Apple watches, is headquartered in Taoyuan, Taiwan. (Photo by Cheng Ting-Fang)

TAOYUAN, Taiwan -- Major Apple assembler Quanta Computer reported on Friday its best first quarter sales since 2012, boosted by the MacBook Pro range of personal computers, though its earnings per share hit a 25-quarter low due to significant forex losses on the Taiwan dollar's sharp gain against the greenback.

The company said Apple's notebook line will further help lift the company's performance later this year, and wearable gadgets, mainly virtual reality headsets, are boosting its prospects as well. Apple's Mac sales rose 14% year-on-year in the past quarter.

Other than Macbooks, the Taiwanese company also makes Apple Watches, virtual reality headsets for Microsoft, and data center servers for Google and Facebook.

"We expect our notebook shipments will enjoy a more than 10% sequential increase in the current quarter, and the second half now looks pretty good," said Quanta Vice Chairman C.C. Leung.

"Contributions from wearable products are improving year-over-year, and we expect those to remain a key driver for our growth," Leung said, adding that the traditional holiday season is the best-performing period for such devices.

But growing contributions from the MacBook Pro also hurt the company's gross margin, according to Chief Financial Officer Elton Yang, leading to a fall from 5.1% in the fourth quarter to 4.73% in the January-March period.

The company could also be considering reducing Apple Watch orders next year due to ongoing losses, according to Vincent Chen at Taipei-based Yuanta Investment Consulting.

Chen said that according to his estimate, Quanta lost 4 billion New Taiwan dollars ($132.6 million) over the past two years in total on the Apple Watch, and it is likely the company will abandon the product and turn it over to Taiwanese rival Compal Electronics.

Apple does not provide details on the Apple Watch's contribution to the company's earnings, although CEO Tim Cook said that in the past quarter the device's sales almost doubled from last year.

In the first quarter, Quanta reported net profit of NT$2.79 billion, down 22.8% on the year, on revenue of NT$227.91 billion, up 15.5%. The company booked NT$649 million in forex losses, compared to a gain of NT$923 million in the October-December period.

Earnings per share was NT$0.72.

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