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Technology Stocks : Deswell Industries (DSWL) -- Ignore unavailable to you. Want to Upgrade?

To: Kevyn Collins-Thompson who wrote (1411)	12/14/2005 11:02:04 PM
From: Clouseau	Read Replies (1) \| Respond to of 1418

Anyone still here? Ugh - trouble in River City...and this has been such a good company for so many years! No wonder the stock has been dropping; someone knew what was coming down...and not just the bums who hid the phony sales. And the outlook is lousy. Bummer. "During the quarter, both our plastic division and the electronic & metallic division recorded a 16.9% and 3.2% decrease in revenue respectively. The decrease in revenue in the plastic division was primarily attributed to the following reasons: First, our business with one of our key customers decreased by approximately 60% as compared to the comparable quarter of fiscal 2005 as we chose not to accept significantly lower margin business from this customer. Second, technical issues involved with another customer's next generation of product models delayed the progress of production of the new models, resulting in 100% drop in purchase orders from this customer for the quarter. Third, margins for many of our longer term products decreased since over 50% of the higher resin and oil prices could not be passed through to our customers. In addition, labor rates have increased approximately 20% in the regions where our facilities are and the Chinese renminbi currency has appreciated approximately 2%. Finally, some new orders from existing customers were delayed until next fiscal year. " Mr. Lau continued, "Excluding the effect of the provision for approximately $1 million in doubtful sales of metallic products and the decrease in metallic product sales of $563,000 this quarter, the revenue of our electronic product sales increased 5.7% as compared with the corresponding quarter in the prior year. Revenues during the quarter were impacted by pricing pressure. During the quarter we strengthened our material sourcing strategy and improved procurement efficiency in an effort to improve our net margins." Mr. Lau continued, "We are very focused on higher end products to help drive improved gross margins. Nonetheless, our plastic segment will need at least twelve months to recover and we do not see growth in sales from our plastic segment before then. Following the completion of phase III construction of our Dongguan plastic plant in mid 2006, we plan to centralize some operating functions in an effort to lower our overhead costs in the plastic segment. Finally, despite the slower growth in the electronics & metallic division during the quarter, we expect to see steady growth in sales in that division during the coming year."