HTC boss snubs takeover talk

CHALLENGING::Wang insisted she was not influenced by stock prices, and questioned the need for consolidation; yet analysts said without it, cash flow problems could arise

Bloomberg and CNA

Tue, Oct 08, 2013 - Page 14

HTC Corp (宏達電), the Taiwanese smartphone maker that posted a first ever quarterly loss last week, said that the next two months are its “biggest challenge” as the company tries to wrench sales from Apple Inc and Samsung Electronics Co.

“We really have the best technology and the best product,” HTC chairwoman Cher Wang (王雪紅) said in an interview on Bloomberg TV on Saturday, while attending the APEC conference in Bali, Indonesia.

HTC needs to “communicate better” with consumers, she said.

HTC’s shares plunged by their daily maximum limit to NT$126 yesterday, the biggest decline since Sept. 4. The stock has dropped 58.07 percent this year, compared with an 8.24 percent advance on the benchmark TAIEX.

The company is valued at about US$3.7 billion, compared with US$37 billion at its peak.

Goldman Sachs Group Inc cut its price target to NT$80 from NT$86 after the company last week reported a quarterly loss of NT$2.97 billion (US$101 million) for the three months ended last month.

Credit Agricole SA cut its target to NT$91 from NT$93, CLSA Ltd slashed its price target from NT$93 to NT$91, while BNP

Paribas Securities Taiwan Ltd maintained a NT$71 price target for the stock.

“Our communication does have a problem, but we are improving on that,” Wang said.

“It’s a gap between our new products coming out and we are improving our innovation and our marketing,” she said.

The company’s dismal share performance has reportedly made HTC a target for other deep-pocketed handset makers, especially Chinese companies looking to overseas expansion, with prospects such as Lenovo Group Ltd (聯想), Huawei Technologies Co (華為) and ZTE Corp (中興).

“This ubiquitous intelligent technology is still at infancy stage, why would you want to consolidate?” Wang said when asked about mergers in her industry, adding that HTC should achieve a 20 percent share of the high-end smartphone market in China next year.

Wang has repeatedly rebutted market rumors about a potential takeover by Chinese companies.

“We don’t need to be taken over,” she said in an interview with US TV network CNBC’s Managing Asia published on Friday.

“Stock price is really the past. Innovation is the future. I actually never look into the price, it doesn’t influence me,” she said. “The [ability] of the company to be able to stick with [its] vision is the most important.”

Although Wang remains confident about HTC’s innovation and leadership, analysts believe the company is trapped in a vicious cycle in which its poor execution and distribution have led to insufficient scale and less support from component suppliers.

“While the company previously expected the third quarter to be in the trough, we see an even more challenging outlook due to worsening shipments,” BNP Paribas analyst Laura Chen (陳佳儀) wrote in a research note on Friday.

Chen said HTC should consider a joint venture opportunity or secure a strategic partner in order to expand its market share.

“We expect that it could suffer from cash flow difficulties if there is no fundamental improvement,” Chen said.