Mon, Sep 30, 2013 - Page 13 News List

HTC to stay profitable, but outlook still grim: expert

Staff writer, with CNA

Smartphone vendor HTC Corp (宏達電) is likely to remain profitable this year, aided by the sale of its remaining stake in US-based headphones maker Beats Electronics LLC, an analyst said on Saturday.

“HTC is struggling amid fiercer-than-ever competition in the global smartphone market. The gains from the sale of the Beats stake is expected to strengthen HTC’s bottom line and help the smartphone vendor remain profitable this year,” MasterLink Securities (元富證券) analyst Tom Tang (湯忠謙) said.

In a statement released on Friday, HTC said it will sell its remaining 24.84 percent stake in Beats for US$265 million, which would generate about NT$2.52 billion (US$ 85.27 million) in pretax profit.

During the transaction process, which is expected to be completed in the fourth quarter, Beats is to repay a US$150 million loan to HTC, the Taiwanese company said.

“That means that HTC could book about NT$3.9 in earnings per share [EPS] in the period from next month to December, which is expected to boost its bottom line,” Tang said.

It is widely expected among analysts and investors that HTC will incur losses in the third quarter amid concerns that it will not be able to achieve its sales target of NT$50 billion to NT$60 billion for the quarter, according to Tang.

He said that even if HTC’s consolidated sales hit the lower end of its third-quarter target range at NT$50 billion, the company could still suffer a quarterly net loss of about NT$2.9 per share.

In the first half of the year, HTC’s EPS stood at NT$1.60, sharply down from the NT$14.23 recorded in the same period last year.

“Although HTC shares have been hammered by foreign institutional selling amid worries over its shipments, the Beats stake sale announcement is likely to prompt some investors to pick up bargains, which will stabilize HTC stock prices to some extent,” Tang said.

In the first eight months of the year, the company’s shares suffered the steepest decline — 47.31 percent — of the 813 companies listed on the main board.

This month, HTC stock dropped another 17 percent, closing down 2.99 percent at NT$130 on Friday.

“Even if the Beats stake sale helps HTC shares rebound, the upside could be limited,” Tang said. “The asset disposal will only produce one-time gains and many investors will still be keeping a close eye on whether HTC will make a breakthrough in shipments.”

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