Asustek Computer has announced that company president and CEO Jerry Shen will step down at the end of December in a major management and business shakeup that will see it refocus its smartphone operations and venture into the AIoT sector.
It has also announced that SY Hsu and Samson Hu will become co-CEOs, the former currently heading Asustek's PC business and the latter leading its worldwide customer care services. Asustek said the board of directors agreed to adopt a co-CEO management model believing that the pair can work closely together.
For its smartphone business, Asustek said it will modify its strategy to focus primarily on gamers and power users, and will declare a one-time expense of NT$6.2 billion (US$202.55 million) to cover losses from inventory, amortization of advance royalties and costs from the business reorganization.
After his departure from the company, Shen will establish a new company specifically targeting the AIoT (AI + IoT) market segment. Asustek plans to take a 30% stake in Shen's new company.
Asustek chairman Jonney Shih lauded Shen's 25 years of contribution to the company and expects Shen to succeed in the new business.
Asustek internally will also spend a maximum of NT$10 billion on developing its own AIoT business, and will form a strategic team to push into the enterprise and B2B areas with solutions enabled by its experience and technologies, according to the company.
The team is looking to quickly expand the business scale by strategic investments and mergers/acquisitions and is aiming to become a leading player of the AIoT sector in three years.
Asustek will also make some adjustments to its personnel in the smartphone department including laying off or transferring 600-800 of its employees from its worldwide smartphone operations. About 300-400 workers in Taiwan and 400-500 at overseas offices will be affected.
Because of the one-time expense for the smartphone business, Asustek's overall profitability for 2018 is expected to reach a new low since it spun off Pegatron in 2010.
Despite the one-time expense, pressure from US-China trade tensions and the ongoing CPU shortages, Asustek said its operation will remain stable in the fourth quarter of 2018. It said it also expects revenues and profitability to both return to usual growth trends in the second half of 2019.
Having already filled up the gaps in its gaming product lineup in 2018, Asustek said its gaming notebook shipments have been rising throughout the year with annual growth for the segment to reach 20%. For 2019, Asustek is set to strengthen its marketing in some markets such as the US and Asia Pacific, and expects to achieve leaderships in the two regions.
Asustek said although it will report overall losses for the fourth quarter, the company will remain profitable for 2018. Non-smartphone departments will all continue to see profits in the fourth quarter.
For 2019, Asustek is planning to continue distributing dividends of NT$15 in cash. With the company's current net value at around NT$170 billion and cash flow steadily staying above NT$60 billion, the company believes its financial status is strong enough to maintain its operations and venture into the AIoT sector. |