HTC reports jump in Q3 earnings

High Tech Computer Corp (宏達電子), the world's biggest maker of handheld computers operating on Microsoft platforms, yesterday said quarterly earnings more than tripled from a year ago as demand for its products shot up.

High Tech Computer said net income jumped to NT$2.64 billion (US$78.69 million) in the third quarter, compared with NT$752 million during the same period last year.

That brought the company's net income for the first three quarters to a historical high of NT$6.69 billion, or NT$18.96 per share, on sales of NT$45.2 billion.

High Tech supplies smartphones for the world's major mobile operators such as European firms T-Mobile and Vodafone, and Sprint Next Corp of the US. The company also makes pocket PCs, or personal digital assistants (PDAs), for Dell Inc and Palm Inc.

The strong growth bucked the industry downtrend as handset sales usually dwindle in the third quarter.

"Our customers, particularly mobile operators, have been increasingly purchasing our products," High Tech spokesman Martin Lau (劉在武) told investors on a conference call arranged by investment research firm Merrill Lynch yesterday.

Lau expects the growth momentum to extend into the current quarter on Christmas shopping.

"We believe the fourth quarter will be a conventional peak season, which will be reflected in High Tech's operation," Lau said.

Looking ahead, Lau said his company will benefit from strong demand for handsets that use the speedy third-generation (3G) technology next year. High Tech started supplying mobile operators with its first 3G model with Microsoft's latest operating system for mobile phones last month.

"The model will be on the handset lists offered by our mobile operator clients in the first half of next year based on the messages from them," Lau said.

"High Tech's quarterly results are slightly higher than my expectation," said Helen Chen (陳佩君), an analyst with Polaris Securities Co (寶來證券).

Chen added that the results were around 6.5 percent higher than her estimate of NT$2.48 billion.

High Tech would have made a significant breakthrough in landing orders from wireless telecommunications service carriers in the third quarter, Chen said.

Despite the better-than-expected performance, falling gross margin remains a concern for investors and was at the center of yesterday's conference call.

"We have to know how fast gross margin will decline in order to decide the stock's value," said Daniel Wang (王德善), an analyst with Primasia Securities in Taipei.

Gross margin slid to 23.75 percent in the three-month period to September from 25.2 percent in the second quarter, according to Lau.

Though the decline was mild, Wang predicted that High Tech will start to feel the pinch from a sharp decline in gross margin in the second half of next year after more Taiwanese mobile phone makers such as Compal Communications Corp (華寶通訊) join the game.