TAIPEI, Taiwan — Asustek Computer is making a poor choice by getting into the low-end notebook business based on Intel Corp.'s Classmate PC platform, according to an analyst at CLSA Asia Pacific Markets.
At the same time, even though it has reeled in the date for separating its OEM and branded businesses, it's still too late to win it additional orders from the likes of Dell Inc. and Hewlett-Packard, said CLSA's Vincent Chen. Asustek had planned on breaking up the business in 2008, but will now do it by the end of this year.
Nevertheless, Asustek's increasing popularity in the branded market, as well as in-hand OEM orders, is prompting Chen to nearly double 2008 estimates of Asustek notebook shipments, from 2.2 million to 4.2 million.
Asustek, once mostly known for its high performance motherboards, has successfully built up a tidy business in notebooks, cell phones and other related gear during the past few years. But that success is also a curse, forcing it to split its branded business and OEM business to avoid conflict of interest. It cannot supply Dell on the one hand, and compete with it on the other.
Chen said Asustek should have made the move earlier to boost orders for next year. "As Dell and HP usually make notebook OEM order decisions for the next year in June, separation by end-2007 is unlikely to yield order win for 2008," he said.
As for the Asustek's Classmate platform, called the Eee, Chen believes it will only drive down the company's margins. The Eee, unveiled at last week's Computex, is emerging as a competitor to the One Laptop Per Child project. The OLPC cost is down to about $150-$175 while Asustek's Eee will sell for $200. Both will start shipping in or near September. The target for the Eee is to move 500,000 units by year end.
"We are concerned that the low-end model will eventually translate into downward pressure on Asus' premium on notebook ASPs and margin," Chen said.
