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Nam Tai halting some module production

The Associated Press

Nam Tai Electronics Inc. reported Monday that it was profitable for its first quarter as its revenue doubled, but shares sank after the Chinese electronics company said it would halt production of its core products at two plants.

The company said its net income amounted to $5 million, or 11 cents per share, for the quarter ended March 31. It lost $3.6 million, or 8 cents per share, in the first quarter a year ago. The company got a $3.4 million boost tied to legal matters.

Nam Tai's revenue soared to $177.5 million from $87.8 million, largely as a result of the company beginning to produce high-resolution liquid crystal display modules for smartphones in 2012.

However, Nam Tai said that due to a weak consumer market, customer orders for some of liquid crystal display modules were much lower than originally anticipated. The company lowered its prices to meet customer needs.

In order to minimize potential losses, Nam Tai is halting its investment in technology that cannot produce a steady stream of income. It also will halt some of its liquid crystal module production at its Shenzhen and Wuxi manufacturing facilities by the end of June 2013 until the market stabilizes, in order to minimize further losses and preserve cash. These operations make up the core of its existing businesses.

Nam Tai said it is exploring all its alternatives to maintain its liquid crystal module operations, including strategic or technological alliances. However, the company said there is no assurance that it will be able to reach an agreement on favorable and satisfactory terms.

Due to the high level of competition and weak consumer demand, Nam Tai said it expects it will face increasing pressure to cut prices, which could put its profits under substantial pressure this year.

Nam Tai said that it could potentially curtail or end some of its electronic manufacturing services for customers if the situation does not improve.

Shares sank $3.58, nearly 32 percent, to finish at $7.75 in trading Monday. That is near the bottom of its 52-week trading range of $4.75 to $16.37