Mon, Oct 28, 2013 - Page 14 News List

HTC needs time to manage revamp

MANAGEMENT RESHUFFLE:HTC is facing a number of challenges and two ideas might help it: new job descriptions for its leaders and the outsourcing of production

Staff writer, with CNA

Nomura Securities has praised HTC Corp’s (宏達電) move to make managerial changes, but said the smartphone vendor needs to wait before its efforts pay off.

In addition to the management duty shift, news media reported that HTC could outsource its production to concentrate on product design, and that it could start using MediaTek Inc’s (聯發科) chips to raise its competitiveness.

In a recent research note, Nomura Securities said it was glad to see HTC taking action on the challenges it faces as competition escalates and its market share shrinks.

However, it remains to be seen whether HTC’s efforts will help the Taiwanese firm make a turnaround, Nomura Securities said, adding that the company might struggle to become profitable in the fourth quarter of this year and in the first quarter of next year.

HTC posted a net loss of NT$2.97 billion (US$101 million), or NT$3.58 per share, for the third quarter. It was the first time the company had reported a quarterly net loss since it was first listed on the main board in March 2002.

Nomura Securities said it has retained an “underweight” recommendation and a target price of NT$103 on HTC shares.

On Friday, HTC stock bucked the downturn on the broader market as it attracted bargain hunters due to its relatively low valuation. HTC shares closed up 3.09 percent at NT$150, their highest level since Aug. 30, when the stock ended at NT$156.5.

Market analysts said investors have been impressed by a move by HTC CEO Peter Chou (周永明) to transfer some of his duties, such as marketing and supplier relations, to HTC chairwoman Cher Wang (王雪紅), leaving him to focus on product innovation.

Nomura Securities said it hopes that HTC will make more effort to manage its supply chain so that it can avoid a supply shortage, which has dragged down shipments.

The brokerage said it also hopes that when the managerial shift has been worked out, HTC will be able to better communicate with its customers.

The market has speculated that HTC will likely outsource its production to contractors like Hon Hai Precision Industry Co (鴻海精密) and Wistron Corp (緯創). Nomura Securities said if the speculation turns out to be true, HTC will see an easing of the pressure on its profit margin.

The brokerage said if HTC begins to use MediaTek’s chips, which are competitively priced, the vendor will be more likely to grab a higher share of the low-cost smartphone market.

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