Asus 2008 Annual Report Download - page 6

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Though ASUS innovation has shined internationally, profits at ASUS did not meet expectations due
to the financial crisis, economic decline and poor business management. In 2008, profits at ASUS
declined ending five years of consecutive growth. In addition, for the first time since the establishment of
the company, ASUS failed to make a profit in the fourth quarter of last year. After conducting a detailed
analysis and review, ASUS found there were many factors that contributed to this result but four major
factors were involved:
1. The rapid downturn in the global economy caused a sharp contraction in computer demand which
far exceeded the forecasts of our business divisions and seriously affected sales revenues and
operating profit.
2. Because the decline in demand exceeded expectations, notebook computer and LCD monitor
product and material inventories rose which indirectly affected product gross profit and result in the
recognition of the inventory write-down.
3. Dramatic fluctuations in the Euro exchange rate affect the gross profit for some products.
4. After the company division, the business organization and procedures have not been adjusted and
improved to an optimal status.
Following a thorough review conducted by the management team, we resolved to take the following
actions to contain the crisis.
1. Reduce stocks and strictly control inventories
2. Control business expense and control personnel costs, streamline operations, improve personnel
quality.
3. Thoroughly improve and streamline operation procedures
4. Further strengthen product differentiations, create new demand and raise gross profit
5. Hedge against price quote risk; reduce the effect of currency fluctuations on net profit.
The above measures have gradually been put into place and we have already seen some results, but it will
take time to see the effects in other areas. For instance, it will take some time to work through the high
inventories so first quarter profits will still be affected this year. Time is also needed to reduce operating
costs but we will quickly get to work to get some results there.
From the above description, we can see that the weak economy was one of the factors behind the worse
than expected profits, but another major reason was our business management wasn’ t lean enough. A
thirty percent salary reduction has been taken by ASUS vice president and above level executives until
sales return to normal levels. At the same time, all directors have decided to reduce director remuneration
for the previous year by 60%. We hope to learn from these setbacks and quickly reverse course at ASUS
so we can live up to the expectations of investors and others.
Harry Potter author J.K. Rowling, the speaker at Harvard University’ s graduation ceremony, said “failure
is the most liberating experience in life” to the group of young magicians that were graduating from
magic school and entering society. I am also willing to proclaim the benefits of failure my colleagues at
ASUS. I am fully confident in future business and prospects because of ASUS culture and special
characteristics of ASUS people. Crisis is always an opportunity for transformation. After we pass through
this trial by fire, we will emerge stronger than before.
The global economy most likely will not recover in the coming year but this type of environment
can still offer an excellent chance to hone our capabilities. We will draw upon our exceptional tradition
present here at ASUS and extend our values of focus on fundamentals and results, innovation & aesthetics
and lean thinking to every person’ s work. Passing through these storms, we will become even more