Sat, Jul 30, 2011 - Page 12 News List

HTC expects record shipments in Q3

PATENT FIGHT:The smartphone maker expressed confidence in its battle with Apple, especially with its purchase of S3 Graphics to expand its intellectual property portfolio

By Jason Tan  /  Staff Reporter

HTC Corp (宏達電), the world’s No. 5 smartphone brand, yesterday forecast greater business momentum in the third quarter, helped by the launch of new models and growing demand in China.

Shipments are expected to rise to 13.5 million units in the quarter ending September, up from a record 12.1 million in the April-June quarter, the company said.

Revenues in the current quarter are forecast to rise 10 percent sequentially to NT$137 billion (US$4.8 billion), but gross margins are expected to slide to between 27.5 percent and 28.5 percent, from 28.8 percent in the second quarter, it said.

CEO Peter Chou (周永明) yesterday repeatedly expressed his confidence in the company in the patent battle with Apple Inc during a teleconference with analysts, calling on them for faith and continued support.

“We are fully prepared to deal with these litigations ... These cases won’t endanger the company’s fundamentals,” Chou said, adding that the lawsuits were just “little disturbances” in view of HTC’s growth and success.

He added that the purchase of S3 Graphics Co, a US-based graphic chip designer, early this month would give it leverage in the legal battle with Apple.

“Intellectual property portfolios are critical to a company’s long-term operations. HTC has been increasing its investments in this aspect,” he said.

He said the S3 deal could bring in US$700 million in terms of “benefits and values” in the future.

HTC spent US$300 million to acquire S3 and obtain all of the US firm’s patents, including two of which the US International Trade Commission (ITC) this month ruled that Apple infringed in its MacBook computers.

The ITC later said in an initial ruling that HTC violated two Apple patents. Chou said he “felt glad as HTC didn’t violate as many patents as Apple claimed, but only two minor ones.”

The ITC will make a final ruling in December.

HTC may face an injunction in selling smartphones in the US — which accounts for half of its sales — if the outcome favors Apple.

Analysts say HTC might use its S3 patents to negotiate with Apple, or make a settlement before the final ruling.

HTC yesterday also reported that second-quarter profits hit NT$17.52 billion, up 103 percent year-on-year.

That translated to earnings per share of NT$20.64.

Second-quarter revenues advanced for the fifth consecutive quarter to NT$124.4 billion, up 104 percent from the same quarter last year.

That was thanks to its launches of phones such as HTC Sensation, EVO 3D, Wildfire S, ChaCha, Salsa, as well as its first tablet PC called the Flyer.

Despite HTC’s optimism, UBS’ chief electronics hardware analyst Arthur Hsieh (謝宗文) warned about the rising threat from Samsung Electronics Co.

The South Korean giant launched its flagship model, Galaxy S II, to great fanfare, saying this week it sold more than 5 million units in the 85 days following its debut.

HTC’s shares lost 4.8 percent to close at NT$858 on the Taiwan Stock Exchange before the earnings announcement.

Its stock had fallen 31 percent since April 29 as the Apple patent suits and concerns over market competition weighed on investor sentiment.

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