Goldman Sachs warns HTC lagging in low-end market

2013/06/24 12:05:29

(Photo courtesy of HTC Corp.)

Taipei, June 24 (CNA) Taiwan's HTC Corp. may be showing strong momentum at the upper end of the smartphone market but it is still lagging behind rivals in the mid-to-low end smartphone segment, U.S. brokerage Goldman Sachs said Monday.

"While we continue to see positive changes internally and externally at HTC, the area where it has underperformed our expectations is in its mid-low end business, particularly in China," Goldman Sachs analyst Robert Yen wrote in a note to clients.

Yen expected HTC's shipments in China -- which accounted for 20 to 25 percent of its total shipments in 2012 -- to be relatively flat in 2013, far short of the 75 percent growth in end-market shipments by all brands in the Chinese market this year.

The Taoyuan, Taiwan-based company's disappointing smartphone business in the segment has likely been driven by its late response to the growing strength of Chinese brands, Yen explained.

Though HTC was the first major handset maker to enter China's mid-range smartphone segment of 2,000-2,500 Chinese yuan (US$326-US$407), the company's brand premium has failed to fend off Chinese rivals that have flooded the market with products at better performance and lower costs, he said.

"We still think a recovery is in sight for HTC, with its flagship model, a healthy high-end competitive landscape, and ease of supply-chain bottlenecks," Yen said.

"But the disappointment at the low-end may still hinder operating margin recovery due to less scale benefits," he contended.

As a result, the analyst maintained a "buy" rating on the stock but reduced its target price from NT$340 (US$11.29) to NT$310 to reflect HTC's lower mid-low end smartphone shipments and higher operating expense estimates.

HTC shares had fallen 1.41 percent to NT$245 as of 10:33 a.m. Monday in Taipei.

To cash in on the low-cost mobile market, HTC launched an entry-level Desire 200 smartphone in Taiwan on June 18 at a price of NT$4,990 (US$166), the lowest in the company's history.

The new Android phone features a 3.5-inch display, a 1-gigahertz processor from Qualcomm Inc., 4 gigabytes of internal memory, a 5-megapixel camera and a micro-SD card slot for external storage of up to 32GB, HTC said in a statement.

Prior to the Desire 200 launch, HTC priced its entry-to-mid-range products between US$200 and US$250, including those sold in the price-sensitive Chinese market, according to the company.

(By Jeffrey Wu)
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