Fri, Feb 27, 2009 - Page 11 News List

Merrill Lynch cautious on smartphone outlook

By Elizabeth Tchii  /  STAFF REPORTER

After witnessing a slew of smartphone introductions by global vendors at the Mobile World Congress (MWC) in Barcelona, Spain, last week, Merrill Lynch said it was cautious on the outlook for Taiwanese makers amid intensifying competition.

In particular, HTC Corp (宏達電), the world’s largest maker of handsets running on Microsoft’s Windows platform, is likely to experience margin erosion and a decline in average selling prices, Merrill Lynch analysts Laura Chen (陳佳儀 ) and Daniel Kim said in a report released on Tuesday.

The report said that HTC faces rising competition from its South Korean rivals — LG Electronics Inc and Samsung Electronics Co — with each planning to roll out between 10 and 20 Windows Mobile-based smartphone models this year, Merrill Lynch analysts Laura Chen (陳佳儀 ) and Daniel Kim said in a report released on Tuesday.

Competition in the Android-based smartphone market is also growing. To date, HTC is the only maker that has launched Android-based smartphones, but competitors such as Motorola Inc, Garmin-Asus and China’s Huawei Technologies Ltd (華為) are planning to launch their own models later this year.

In addition, HTC could be at a disadvantage because it has to expand its system and continues “to focus on operator-optimized service instead of their own mobile application shops,” Chen and Kim said.

“Similar to Apple Computer Inc’s iTunes application store, Nokia Corp announced the launch of its Ovi Store for downloading free and paid-for applications and content. Microsoft will also have a new Marketplace with thousands of applications,” the analysts wrote.

Although the smartphone market is showing momentum, the fierce competition, declining operator subsidies and potentially weak demand worry the two analysts.

They said they would take a wait-and-see approach and closely observe sell-through on HTC’s new products, such as Touch Diamond 2, Touch Pro 2 and HTC Magic, in the second quarter.

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