Shares of High Tech Computer Corp (HTC, 宏達電) fell to a three-month low yesterday after more investment houses joined a recent downgrade of the stock on concerns of intensifying competition after Nokia said it plans to offer its Symbian operating system system to handset makers for free.
HTC is the world’s largest manufacturer of mobile phones running Microsoft Corp’s operating system. The stock declined 2.5 percent to NT$663, its lowest closing price since it hit NT$660 on March 27.
On Wednesday, Nokia, Sony Ericsson, Motorola and NTT DoCoMo said that they intend to integrate their Symbian OS (TM), S60, UIQ and MOAP (S) operating systems to create one open software platform. Together with AT&T, LG Electronics, Samsung Electronics and others, they said they plan to form the Symbian Foundation to extend the appeal of their unified software platform.
“We believe this move is likely to give Symbian phone makers a meaningful cost advantage over Windows Mobile phone makers,” Citigroup analyst Kevin Chang (張凱偉) wrote in a report on Wednesday.
By eliminating the royalty costs, Chang estimated the pre-3G royalty cost of a Symbian-based device could decline by as much as US$30, the report said.
As Microsoft has not announced any cut in its royalty charge, “we believe a free Symbian operating system will put lots of price pressure on Microsoft devices,” Chang wrote.
Chang downgraded HTC to a “sell,” with a target price of NT$660.
“We believe a potential business model change for Apple’s iPhone and competition from Nokia and Sony Ericsson could result in meaningful market share and margin pressures for HTC starting in the second half of 2008,” he wrote.
Currently, all HTC handsets run Microsoft’s mobile operating system and, even though the company is scheduled to launch its first Android-based Google phone soon, Chang said he predicted Android-based models would only account for less than 10 percent of HTC’s shipments next year, Citigroup’s report said.
Yuanta Core Pacific Securities (元大京華證券) also downgraded HTC to a “sell” from a “hold,” in expectation of more lower-price smartphones hitting the market in the near future, including a next-generation iPhone supporting data transmission using 2.75-generation wireless technology and the new Google phones.
As Nokia holds 50 percent of the smartphone market and is driving down prices, competitors would have to follow suit by offering free mobile operating systems, Yuanta said.
“HTC, as the dominant Microsoft OS smartphone advocate, will suffer the most from the low price trend of Microsoft smartphones,” Vincent Chen (陳豊丰), head of Yuanta’s regional downstream tech team, said yesterday.
As no other major new models are on the horizon after the Diamond, HTC’s gross margins would reach a peak this year, Chen said.
Chen cut the target price on HTC to NT$705, down about 18 percent from the previous target of NT$860.
Separately, HTC yesterday said its new Touch series, Touch Diamond, is set to hit the stores this weekend at the phone company’s outlets in Taiwan after its debut in Hong Kong.
The company declined to comment on whether it would work with local telecoms operators to offer free handsets plus a new number with every two-year contract.
Earlier this week, HTC cooperated with Australia’s biggest phone company, Telstra, to offer a free Diamond phone for each two-year contract with a minimum monthly fee of A$80 (US$77) starting in mid-August.
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