ACCORDING TO MULTIPLE REPORTS, it looks like Asus might be getting ready to pull the plug on its motherboard business unit. This might sound like a very drastic move by Asus, but with the Pegatron spinoff as a separate business entity, it might just make long term sense. It’s hardly news that Asus is aspiring to become something more and has long had its sights on becoming the next Acer. This might seem to be an odd goal, but Acer has been a phenomenally successful company.
However, to become the next Acer, Asus would be forced to spin off its manufacturing and components business units, which is something Asus have been busy doing for the last couple of years. Back in January of 2007 Asus went through its first major restructuring by splitting into Asus, Pegatron and Unihan. The idea back then was that Pegatron was to take over Asus’ OEM component business while Unihan was set up to handle non component related manufacturing such as chassis and moulding.
What we’re seeing now is a very different kind of restructuring, as Asus is about to reduce its capital by 85 percent. On the other hand this also means that Pegatron will see its capital increased by 85 percent. This might not seem like a big deal, but as Pegatron will in the long term become a separate company, although Asus will control 25 percent of the shares in Pegatron, with Asus’ share holders controlling the remaining 75 percent. However, the spinoff isn’t set to be finalised until July 2010.
This didn’t go down well with the Taiwanese stock market, as over the past two days Asus shares have tanked in value after having been on a steady incline from a bottom low of only $0.91 at the begining of this year. Asus stocks were traded at around $1.74 today, down from having been traded at an average value of about $2 over the past week. A total of NT$36,500,000,000 or $1.12 billion was wiped off the value of Asus, which is anything but pocket change. Traders on the Taiwanese stock market are waiting for the value of Asus to drop below $1.64 within the next few days. On top of this, if the shareholders approve Asus’ move to spin off Pegatron as separate business, Pegatrons shares are unlikely to start trading at more than about $1.25, which is far lower than Asus’ recent share price.
The bad news doesn’t stop here, as Digitimes is reporting that Pegatron will be focusing on ASRock rather than Asus and as such Asus will only be outsourcing about 30 percent of its motherboard business to Pegatron. The rest will apparently be going to an FIC subsidiary in China. Considering that Asus is the leading motherboard manufacturer in the world at the moment, this isn’t a good sign as FIC was never known as a high quality motherboard manufacturer. If Asus ends up having quality issues it could see consumers jumping to other brands, such as its current main competitors, Gigabyte and MSI.
Pegatron on the other hand is looking to put more focus on its consumer brand ASRock and is expecting to ship some seven million ASRock motherboards this year. This puts ASRock on almost the same level as MSI and ECS, who are both competing for the spot of the third largest motherboard manufacturer in the world. ASRock is also going to put more focus on its PC and mobile computing business units and might even expand into other areas such as e-book readers, LCD TVs and handheld devices.
If all of this adds up, then we’ll see Asus shift focus away from components to being something of a box shifter, much like Acer. We don’t know of this is the right move by Asus and judging by the stock market’s response, Asus hasn’t done itself any favours so far. If the company then starts to alienate its many loyal customers, something that Acer never did, things could be getting much worse.S|A
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