Thursday, March 31st 2011

Foxconn Posts $218 Million Full-Year Net Loss

The year 2010 was an extremely difficult year for Foxconn. We saw major changes in the handset ecosystem triggered by entry of new players, introduction of new software and applications, as well as emergence of new business models. Market dynamics shifted drastically and created tough challenges for some industry players as well as the Company.

Despite our continual efforts to further diversify customer base and sources of revenue, the operation results for the Company concluded less than satisfaction. Revenue for the year 2010 was US$6,626 million, which represents a change of US$588 million, or 8.2% less than the prior year revenue of US$7,214 million.

The intensifying market share struggles among global OEM brands had made the global handset EMS market difficult and caused pricing pressure for the Group's products. Higher manufacturing overhead resulting primarily from lower utilization of facilities and relocation, changes in product mix, impairment losses, continued long-term investment in research and development activities as well as higher consolidated income tax also affected our financial performance. Loss for the year 2010 attributable to equity holders of the Company was US$218 million, representing a decline of 659% over the profit for prior year amount of US$39 million. Basic loss per share for the year 2010 were US3.06 cents.

In 2010, we continued to execute our capacity re-location programs, which commenced in the latter part of 2008. These efforts were set out to right size the cost and scale of our operations in order to cope with the challenges in our business. In PRC, we continued to focus on expansion in Langfang, Beijing and Tianjin, while reducing our exposure in the higher cost areas. We initiated discussions with Hon Hai group companies to transfer some less utilized assets to satisfy their growing demand and trim down our fixed costs. Outside of the PRC, we also reviewed our local business opportunities and constantly looked to improve profitability of our various sites. Some of these cost streamlining actions took longer than we had expected and thus created unfavorable impact to our financial performance. Relocation and downturn of our business also generated asset impairments that hit our bottom line.

While the cost optimization efforts persisted, we did not slow down our R&D investments. Our investments in design engineering resources for smart phones started to see good progress in 2010. It is our belief that we have built respectable capabilities in this area which will help our customers tremendously in enriching their product portfolio and shortening their products' time to market. Smart phones have generated strong growth momentum in the market and we believe our investments in this area will prove to be vital for our future.

Looking ahead to 2011, our alarming setback in 2010 has created a sense of urgency in the organization. We need to change as the market is changing and our customers are changing. We need to take decisive actions to conclude our capacity re-location, optimize our cost structure and return to profitability. As part of the efforts for resources consolidation, we have discussed with Hon Hai group to sell our Taiyuan legal entity and its assets to them. Subject to independent shareholders' approval and completion of the transaction, we believe it will help us in reducing our fixed costs for operation while allowing Hon Hai to further expand in the Taiyuan area. We need to serve our existing customers better and approach more new customers. As smart phones become the mainstream of the market, we believe our end-to-end solutions from design to manufacturing and services put us in a leading position in the market place.

As at 31 December 2010, the Group had a total of 126,687 (2009: 118,702) employees. Total staff costs incurred during the year 2010 amounted to US$565 million (2009: US$485 million). The Group offers a comprehensive remuneration policy which is reviewed by the management on a regular basis.

For details, refer to this document (PDF).Source: ZDNet
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12 Comments on Foxconn Posts $218 Million Full-Year Net Loss

~Technological Technocrat~
no shit, 2010 hit everyone hard. but i half expected Foxconn to come through it a little easier as they have their fingers in just about anything that involes technology in general.

One of the biggest changes to foxconn in 2010 was they started making enthusiast motherboards. unfortunately despite having positive reviews, overclockablity was still an issue with their boards.

I hope they have a better year.
Posted on Reply
Babylon system falling down, economy wont get better only worst or stabilize.
Posted on Edit | Reply
That's what you get when you treat your employees like shit. Karma, ever heard of it, Foxconn?!? :mad:
Posted on Reply
how can you lose 218 million and still be in business
Posted on Reply
Xtreme Refugee
AthlonX2 said:
how can you lose 218 million and still be in business
the better question is how can a company be so deeply embedded in the tech market yet post a huge loss
Posted on Reply
I entirely blame Apple.
Posted on Reply
Jack Doph
AthlonX2 said:
how can you lose 218 million and still be in business
The bank is my friend
The bank is my friend
The bank is my friend
/end alice-in-wonderland

Anything is possible in almost any market, when there's some clout behind you, based on previous or historic performance.
In time to come, I'm sure Foxconn will do just fine again.
The economic down-turn has hit everyone hard. It's just more obvious with the smaller players in the field..
And.. we all still need sockets made by someone, even if this someone no longer plays [m]any other fields ;)
Posted on Reply
Taskforce said:
Babylon system falling down, economy wont get better only worst or stabilize.
Babylon = Foxconn?

Which company deserves any better that to make loss of 8.2% if they are in the sportlight of the TPU news moderator AND even official newspapers for having one of the worst working condition in the Computer-industry.

I know about news telling some China factory workers kill themselfs, 2 or something in a row, since the conditions in that Foxconn run facility are soooo inhumany.
Maybe some still remember this stuff...

So I concluded I couldn´t care less about Foxconn going down slowly.
Man! Even their hardware is not worth buying :mad:
And even if I would think about aiding that company in any way.
Posted on Reply
Maban said:
I entirely blame Apple.
You mean since Apple uses much/mostly Foxconn motherboards etc?
Posted on Reply
Last time I checked, Foxconn had over ~920,000 employees, not ~127,000.

I haven't read the article in depth.
Posted on Reply
Foxconn has almost a million employees throughout 13 different factories, and it's the world's largest PCB assembler.

Even thinking that Foxconn going down is a "good thing" means pure ignorance of the company's importance in our daily lives.
The same could be said of Nokia, Microsoft or TSMC.
If one of those disappeared all of the sudden, the world would stand still and we'd fall into an era of technological regression.

how can you lose 218 million and still be in business
You don't think of it that way, in a company of this dimension. It's not like this is a cake store losing 218 million.
218 million is but 3,3% of the company's 2010 revenue. I'm pretty sure they're sitting on cash reserves that could cover ten times that net loss.
Besides, the company went under major structural changes, so additional expenses for 2010 were expected.
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