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Shares of HTC plunge amid concerns over profitability

2012/04/17 12:41:10

Taipei, April 17 (CNA) Shares of smartphone maker HTC Corp. took a beating Tuesday morning amid lingering concerns over its profitability, especially as the company vies for market share in China by offering lower-priced, and lower-margin, products, dealers said.

HTC's fall triggered selling in other large cap high-tech stocks on the main board, and the weighted index also was weighed down by worries over a Ministry of Finance proposal to impose a capital gains tax on stock investments, they said.

As of 11:36 a.m., HTC shares had fallen almost 6 percent to NT$486.00 (US$16.47) with 10.29 million shares changing hands, while the weighted index was down 1.35 percent at 7,625.36.

"After HTC reported disappointing earnings for the first quarter of this year earlier this month, sentiment toward the stock has turned very cautious," MasterLink analyst Tom Tang said.

In the first quarter, HTC posted NT$4.46 billion in unaudited consolidated net profit, down 70 percent from a year earlier, while its earnings per share stood at NT$5.35, down sharply from NT$18.36 a year earlier.

"In the high-end smartphone market, HTC has been hurt by strong competition from Samsung Electronics," Tang said. "To expand its market share, the company has to enter the mid- to low-end market."

The company is planning to launch a series of bargain smartphone models in China priced below 2,000 Chinese yuan (NT$10,000) to gain a larger share of the mainland market.

"But the company's plan to launch low-priced models in China has raised concerns over its bottom line, which will be further squeezed by such a business strategy," Tang said.

"The worries over HTC's earnings are prompting investors to unload their holdings at the moment."

Tang said the sell-off of HTC shares led to a domino effect on other high-tech heavyweights Tuesday morning.

Shares of Largan Precision, a cellphone camera lens supplier, were down 3.33 percent to NT$551.00 and shares of touch panel maker TPK had fallen 5.05 percent to NT$432.00 after Apple's shares took a dive overnight, partly on lower-than-expected sales of its new iPad.

The two companies are suppliers of the U.S. consumer electronics giant.

"I suspect the selling in those large cap stocks largely came from their majority shareholders on fears of a capital gains tax proposed by the MOF," Tang said.

"These majority shareholders are simply seizing any opportunity at the moment to cut their holdings in a bid to avoid future taxes once the capital gains tax goes into effect," he said.

(By Frances Huang)