HTC Corp (宏達電) yesterday said it would book an investment loss of US$40 million on its stake in US cloud gaming service provider OnLive Inc, according to a filing it made with the Taiwan Stock Exchange.
“Due to a lack of operating cash and an inability to raise new capital, OnLive applied over the weekend for asset restructuring,” HTC said in the filing.
The investment loss is the same as the amount HTC paid for its stake in the company in February last year to help it lure users to its tablets and smartphones.
HTC did not disclosed the size of its stake in the US gaming operator.
The news sent HTC shares plummeting more than 4 percent yesterday morning because investors were concerned about whether OnLive is just the latest in a string of HTC acquisitions running into problems.
Shares in HTC closed at NT$239.5, down NT$10.5 or 4.2 percent. HTC shares have plummeted in recent months, falling 51.81 percent since the beginning of this year and 66.69 percent from a year ago, as the handset maker has lost substantial market share to rivals Apple Inc and Samsung Electronics Co.
Last month, the smartphone maker announced its plan to sell back half of its 50.1 percent stake in the US headphone manufacturer, Beats Electronics LLC and said it expected to book an investment loss of US$4.88 million.
The announcements have cast doubts over HTC’s investment strategy.
“HTC’s chief financial officer will need to revise all the investments the company has made in recent years, which are seen as having lower-than-expected synergies with HTC’s products or brand image,” Jeff Pu (蒲得宇), an equity research analyst at Fubon Securities Co (富邦證券), said by telephone.
“I think HTC’s acquisition of S3 Graphics Co is the next case that investors will be concerned about,” he said.
“Investors may wonder if HTC has new standpoints for the S3 acquisition, since the investment amount there could be as large as US$300 million,” Pu added.
Just hours after HTC announced its investment loss in OnLive, the Taiwanese company issued a separate statement saying that it has acquired a 17.1 percent stake in a US software developer, Magnet Systems Inc, for US$35.4 million.
HTC said that Magnet has created a next-generation enterprise platform that accelerates the development of mobile applications.
“The investment will bring social, mobile, and cloud capabilities to HTC’s portfolio of service offerings to its mobile enterprise customers,” it said.