iPhone touchscreen supplier under scrutiny

The primary supplier of touchscreens for the iPhone is being chastized for its poor financial affairs, according to a new report. Balda -- a German company, which builds the screens in China through a joint venture -- sold $50 million in "convertible profit participation rights" to institutional investors on October 31st. These rights came with 8 percent interest, which is being called too expensive for what was received. Moreover, Balda's management has explained very little about why it made its decision. The executives show a "needless lack of transparency," says analyst Tobias Loskamp of BHF-Bank.

On the same day as the rights were sold, Balda issued a third-quarter financial report noting that, before interest or taxes, it had earned $3 million off sales of $114 million. While this was an improvement on a $20 million loss from the same quarter a year ago, the company has admitted to taking a $30 million net loss in its latest period.

Compounding problems, sections of the company that executives are trying to sell, but haven't yet, have been recorded as discontinued operations. This does not technically break any accounting regulations, but has only fueled speculation that the company is deliberately skewing negative data.

Ironically, Balda's greatest asset remains unofficial. Neither Balda nor Apple have confirmed that the former is supplying screens for the iPhone, despite the fact that its screens are some of the few to be both durable and multi-touch capable. Similarly, an iSuppli teardown seems to have verified the information. Balda may also be providing screens for the iPod touch, but it is suspected that other suppliers such as Sharp may be involved too.

Filed under: Apple