Wed, Nov 07, 2007 - Page 12 News List

HTC joins Google's wireless platform

OPEN HANDSET ALLIANCE The alliance may enable HTC to expand mobile phone production beyond Microsoft-based OS, but analysts voiced concern over margins

By Lisa Wang  /  STAFF REPORTER

High Tech Computer Corp (HTC, 宏達電), the world's biggest maker of mobile phones running on Microsoft Corp's system, said yesterday it was developing a new open platform for wireless devices in collaboration with Internet giant Google Inc and other companies, paving the way for the sale of the much-talked about Gphone next year.

Thirty-four companies, including Google, HTC and handset chipmaker Qualcomm Inc, formed the Open Handset Alliance, which aims to develop technologies that will significantly lower the cost of developing and distributing mobile devices and services, the companies said in a joint statement.

The commonly shared platform -- called Android -- is the first step in this direction, they said. HTC said it expects to launch the first mobile phones running on the Android system in the second half of next year.

"We believe the Gphone will be one of the products using the new platform," said Jonathan Liao (廖俊傑) of SinoPac Securities Corp (永豐金證券).

HTC is in intensive talks with Google about supplying phones featuring Google's services, such as Google Map and Internet browsing, by the end of next year, Liao said.

The Taoyuan-based company could get an order of 1 million units a year from Google, Liao said.

"Our participation in the Open Handset Alliance and adoption of the Android platform in the second half of 2008 will enable us to expand our device portfolio into a new category," HTC chief executive Peter Chou (周永明) said in the statement.

HTC mainly manufactures mobile phones operating on Microsoft's system. Sales of handsets running on the new Android platform will help the company expand into a new area -- phones operating on the Linux system.

The news, announced before the opening of the local stock market yesterday, failed to lift HTC's stock yesterday. Shares of the handset maker slid 1.27 percent to NT$622, compared with the benchmark index's 0.17 percent loss.

"Investors have factored in the potential order from Google. And we do not think the order will contribute significantly to [HTC's bottom line] as the gross margin may be much lower than that of its existing products," Liao said.

Investors were also concerned about earnings erosion with the implementation of the new employee bonus rule next year, Liao said.

The additional spending could take 20 percent off HTC's net profit next year, which will significantly cap its growth outlook or even result in flat earnings next year, he said.

HTC told investors last week that it would not finalize the outlay until the first quarter of next year, but that spending was likely to be capped at 25 percent of its earnings.

HTC yesterday also reported record-high revenues last month. Revenues grew more than 24 percent to NT$13.1 billion (US$405 million) last month from NT$10.5 billion in September, which also beat consensus expectations of NT$12 billion.

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