High Tech Computer Corp (HTC, 宏達電), the world’s largest maker of handsets based on Microsoft Corp’s Windows operating system, said yesterday that it expects to ship 600,000 units of T-Mobile G1 handsets this year, shrugging off concerns that the global economic slowdown might take its toll on the company.
The T-Mobile G1, previously known as the HTC Dream, is an Internet-enabled smartphone designed by HTC. It is the first smartphone available on the market that runs on Google Inc’s Android mobile device platform. It is viewed as an answer to Apple Inc’s iPhone.
“Our T-Mobile G1 is now very popular in the market, and our fourth quarter sales are looking healthy,” Peter Chou (周永明), chief executive officer and president at HTC, said yesterday.
The G1 handset was released for pre-order through T-Mobile in the US on Sept. 23 and will be available in stores there on Oct. 22. While HTC has high hopes that the launch will drive up revenues, investors punished its shares recently in view of margin pressure amid rising price competition from Apple and Nokia as well as slowing demand in the US and Europe.
“I think our stock prices seem to be fairly low at the moment,” Chou told reporters yesterday on the sidelines of the unveiling of Luxgen Motor Co’s (納智捷汽車) new smart, electrical car module, in which HTC is a cooperating partner.
“For anyone who wishes to invest, I would suggest they invest in good companies [referring to HTC]. HTC will not let our investors down,” Chou said.
“A company’s fundamentals are the most import thing … I think HTC’s competitiveness is now at its best since we were established,” he said.
A Citigroup analyst said the launch of the iPhone would force all smartphone makers to match whatever price Apple comes up with, which will in turn put pressure on everyone’s margins.
Kevin Chang (張凱偉), a Citi Investment Research analyst, said in a client note on Tuesday that after a subsidy, the G1 is priced at US$179, US$20 lower than the iPhone.
“We expect HTC’s operating margin to drop from 20 percent in 2008 to only 15 percent in 2009 due to a higher mix of consumer products, rising competition in the smartphone market and higher marketing expenses,” Chang said.
He also expects HTC’s earnings to decline roughly 3 percent year-on-year next year, despite a 36 percent increase in shipment growth.
Even so, Citigroup said it believes HTC’s share price is getting close to hitting bottom, after Taiwan Stock Exchange tallies showed shares of HTC plunged 31.39 percent so far this year.
“We upgrade the stock to ‘buy’ and raise our target price slightly to reflect HTC’s higher growth potential driven by the Android phone,” Chang said, citing the company’s ability to deal with competition while maintaining healthy unit growth and stable margins over the past two years.
Chang recommended a target price of NT$507 for HTC’s stock, up from its previous target of NT$446. The new target price represents an upside potential of 23.36 percent from HTC’s closing share prices of NT$411 on the Taiwan Stock Exchange yesterday.
“Given falling market expectations and investor appetite for quality names, we expect HTC’s share price to outperform,” Chang said.
To prop up its sagging share prices, HTC announced on Tuesday that it would repurchase 10 million shares, or 1.32 percent of its outstanding shares, for an amount of up to NT$41.3 billion on the open market from Oct. 8 to Dec. 7.
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