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Foreign brokerages warn of impact from barred HTC phones

2012/05/17 14:38:56

Taipei, May 17 (CNA) A delay of HTC Corp.'s new smartphones into the U.S. market might stop the Taiwanese vendor from gaining full momentum in its quarterly sales, foreign brokerages said Thursday.

The U.S. availability of two of its new flagship products, the One X and the EVO 4G LTE, have been delayed by U.S. Customs as the agency is investigating whether the phones infringe on a patent of Apple Inc., HTC said in a statement released a day earlier.

The Taoyuan-based manufacturer said the products are in compliance with a ruling filed by the U.S. International Trade Commission (USITC) and that the company is working closely with U.S. Customs to secure approval for the devices.

"The U.S. telecom channels still have some existing models and inventory on hand, but this issue might slow down HTC's shipments of new models to the U.S.," Robert Cheng, head of Taiwan research at Bank of America Merrill Lynch, wrote in a research note.

"If the new products are detained by U.S. Customs for four weeks, the sales impact on HTC in the second quarter of 2012 will be around 5 to 10 percent," he said.

On April 24, HTC forecast that its revenue will reach NT$105 billion (US$3.55 billion) in the second quarter of this year, up 55 percent from a disappointing first quarter.

The U.S. market accounted for 30 percent of HTC's total shipments in the first quarter, according to research firm Gartner Inc.

In the USITC ruling filed in December last year, HTC was found to be in violation of an Apple patent involving data-detection technology.

The company was given until April 19 to come up with an alternative or face a ban on U.S. sales of its handsets with the function.

Macquarie Securities said that HTC made some shipments of its One X into the U.S. in April, as the country's No. 2 carrier, AT&T Inc., had announced a sales plan for the model, while Sprint Nextel Corp. is taking pre-orders of the EVO 4G LTE.

"If the delay is short, then we might anticipate slower May shipments, but this will be followed by a strong month to fill the channel inventory," said Daniel Chang, director of Macquarie Securities Taiwan research division.

"However, if the delay is longer, HTC's customers could shift their promotions to other models, especially Samsung, which has launched its Galaxy S3, followed by Apple's expected mega-launch of a new iPhone in September," he said.

C.K. Cheng, a handset and networking analyst at CLSA Asia-Pacific Markets, said HTC's share price will be under pressure in the near term as the market does not like uncertainty.

Given that CLSA expects AT&T and Sprint's LTE phones to account for 20 percent of HTC's second-quarter revenue, Cheng estimated that a one- week delay in products shipped to AT&T and Sprint will impact HTC's second-quarter earnings by 3 percent, leading to a 1 percent impact on its earnings for the whole of 2012.

As of 12:31 p.m. Thursday, HTC shares had risen 1.22 percent to NT$416 in trading on the Taiwan bourse.

(By Jeffrey Wu)