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Consumer Peripherals

Tight-lipped Hon Hai Plays it Close to the Vest

19 September 2013

Despite its astounding success in recent years, Taiwanese electronic manufacturing services provider Hon Hai Precision Industry Co. Ltd. remains unusually tight-lipped when it comes to disclosing information. Analysts believe the company's lack of openness doesn't help public perception of Hon Hai or the company's market valuation.

Typically, Hon Hai—which also operates under the trade name Foxconn—discloses only what information it is strictly required to as a publicly traded company under Taiwanese law. Its legendary founder and CEO, Terry Gou, gives virtually no interviews. (See Trapped by Success, Hon Hai Plots Next Move.)

Indeed, the culture of Hon Hai closely mirrors the personality of Gou. They both work hard, run themselves with military precision and reveal as little as possible.

Perhaps that is not surprising, given that Gou founded the company and has run it for four decades. Though Hon Hai is public, Gou remains the largest shareholder, owning more than 12 percent of the company.

Hon Hai's corporate structure is complicated, confusing and opaque. It owns a portfolio of 20 subsidiaries and has at least 23 affiliated companies, the ownership of which is something of a mystery. "It's the hardest company to figure out, because they disclose so little and so much of it just rolls up to one guy [Gou], and that's it," says Thomas J. Dinges, senior principal analyst, Electronics & Media, at IHS.

The lack of information hurts the company's valuation in the market, says Bernstein Research. "Informational opaqueness adds risks to the stock, particularly in situations where business directions go against the company," the firm said in a recent report. "The confusion adds to the general tone of skepticism about Hon Hai."

Hon Hai's stock price has rallied steadily since June and the company's market capitalization stands at more than $33 billion. Nevertheless, the stock price is down about 13 percent over the past 12 months.



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