HTC Corp (宏達電), the leading maker of smartphones that run on Windows Mobile and Android platforms, has been aggressive in launching both high-end and low-end products lately. But analysts are divided as to whether this is a bold step to expand market share or instead poses a serious risk to the company’s gross profit margin.
On Tuesday, India’s Bharti Airtel Ltd launched a low-end HTC smartphone, the HTC Smart, which is its first 3G smartphone based on Qualcomm’s Brew Mobile platform. This came after Japan’s Softbank Corp announced on Sunday that it planned to introduce its first Google Android phone, HTC Desire, later this month and Sprint Nextel Corp presented its first smartphone for the WiMAX network, HTC Evo, last week at the CTIA Wireless Show in Las Vegas.
Vodafone UK, meanwhile, said on Tuesday that it would launch the HTC Legend tomorrow and Chunghwa Telecom Co (中華電信), the nation’s largest telecoms operator, is expected to market the HTC Smart in Taiwan soon, according to an e-mail invitation to journalists about a scheduled press conference on Friday.
Shares of HTC rose 2.20 percent to NT$371 yesterday on the Taiwan Stock Exchange, outperforming the TAIEX index’s 0.53-percent fall. So far this year, the stock has risen 1.23 percent, compared with a decline of 3.27 percent on the TAIEX.
“HTC surged on the launch of a low-end smartphone in India and [the market’s] positive second-quarter shipment outlook,” SinoPac Securities Corp (永豐金證券) said in a note yesterday. The stock also rose after BNP Paribas raised its rating to “buy” from “hold” and offered a new target price of NT$430 from an earlier NT$300.
But analysts were divided over HTC’s marketing strategy.
UBS analyst Arthur Hsieh (謝宗文), who upgraded HTC to “buy” from “neutral” in an investment note on Monday, said handset prices should be stable in the second quarter, despite increasing competition in this line of smartphone business.
“Our survey suggests that HTC might gain [market] share in the US in the second quarter as it has been rolling out new products that could help carriers increase their average revenue per user,” Hsieh said in the note.
UBS increased its target price on HTC, the maker of Google’s Nexus One smartphone, from NT$342 to NT$425.
As HTC appears to lead in designing phones that run on the Android platform, Morgan Stanley analyst Jasmine Lu (呂智穎) wrote in a report on March 25 that HTC would be a “key beneficiary of the mobile Internet/Android wave.”
“In our view, the consensus under-appreciates HTC’s share potential and over-estimates concerns of the degree and speed of pricing and margin contraction,” Lu said.
The analyst also shrugged off fears of strong competition from Motorola Inc’s new Droid smartphone. “Motorola seems to be a bit behind HTC in the next one or two quarters after HTC rapidly upgraded high-end models” on the Android platform, Lu said.
Goldman Sachs analyst Robert Chen (陳柏宇) voiced the same positive view on HTC’s increased market share in the US, especially following the launch of the fourth-generation (4G) WiMAX HTC Evo at the CTIA show last week.
“We continue to see more HTC’s flagship products hit the US market through different operators, which we believe will be a strong growth driver for HTC as the US market becomes an early and possibly fastest Android OS adopter,” Chen said in a research report dated last Thursday.
With HTC expected to wage an intensive marketing campaign to increase its brand profile, Morgan Stanley maintained its “overweight” recommendation on the stock with a target price of NT$450, while Goldman Sachs reiterated its “buy” rating with a target price of NT$423.
But Citigroup analyst Kevin Chang (張凱偉) appeared unfazed by HTC’s recent marketing efforts and higher shipment forecast. Instead, he raised concerns about the company’s potential inventory buildup and continually falling margins under an aggressive pricing strategy.
In a report issued on March 22 to its clients, Citigroup said HTC would face more competition in Android phones from other makers this year, its new model based on the Windows Mobile 7 platform is not likely to hit the market until the fourth quarter, and Apple’s new iPhone will be available in the middle of the year through more operators in Europe and Asia.
Against this backdrop, if HTC were to deliver on more shipments this year, it would be “at the expense of very sharp margin erosion,” Chang said.
Citigroup offered a “sell” rating on HTC, with a target price of NT$250
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
Greek tourism student Katerina quit within a month of starting work at a five-star hotel in Halkidiki, one of the country’s top destinations, because she said conditions were so dire. Beyond the bad pay, the 22-year-old said that her working and living conditions were “miserable and unacceptable.” Millions holiday in Greece every year, but its vital tourism industry is finding it harder and harder to recruit Greeks to look after them. “I was asked to work in any department of the hotel where there was a need, from service to cleaning,” said Katerina, a tourism and marketing student, who would
i Gasoline and diesel prices at fuel stations are this week to rise NT$0.1 per liter, as tensions in the Middle East pushed crude oil prices higher last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices last week rose for the third consecutive week due to an escalating conflict between Israel and Iran, as the market is concerned that the situation in the Middle East might affect crude oil supply, CPC and Formosa said in separate statements. Front-month Brent crude oil futures — the international oil benchmark — rose 3.75 percent to settle at US$77.01
RSS