Back to list

HTC shares tumble further on foreign investor sell-off

2012/07/24 12:21:34

Taipei, July 24 (CNA) Shares of smartphone vendor HTC Corp. extended their losses Tuesday morning on selling by foreign institutional investors amid concerns that fierce competition from Apple Inc. and Samsung Electronics Co. will hurt HTC's earnings outlook, dealers said.

HTC's decision to sell back half of a 51 percent stake it owned in U.S.-based headphone maker Beats Electronics less than one year after the acquisition was made also has cast doubts over HTC's judgment in making strategic investments, they said.

As of 11:31 a.m., shares of HTC had lost 3.66 percent to NT$276.50 (US$9.22) with 8.31 million shares changing hands. The benchmark weighted index was down 0.76 percent at 6,975.22.

"I suspect the current selling largely comes from foreign institutional investors after their sell-off yesterday due to a lack of confidence in HTC's bottom line," Hua Nan Securities analyst Henry Miao said.

On Monday, foreign institutional investors sold a net 3.28 million HTC shares to send the stock into a tailspin and close 4.33 percent lower.

Miao said the popularity of Samsung's Galaxy S3 model has put great pressure on HTC's shipments worldwide, referring to HTC's disappointing second quarter results.

"And even worse, there are rising fears that once Apple launches its iPhone 5 in the fourth quarter, HTC will face more challenges," Miao said. "So faith in the Taiwanese company has worn thin."

"It's no surprise that foreign institutional investors are unloading their HTC holdings as there are few signs that the smartphone vendor will make any immediate turnaround," Miao said.

In a recent research note, Citigroup cut its forecasts of HTC earnings per share for the third quarter and the fourth quarter by 12 percent and 28 percent, respectively, after taking into account the strong competition from Apple and Samsung.

Miao said HTC's decision to sell back part of the stake it owned in Beats has made many investors wary of the smartphone vendor's ability to carry out an investment plan.

"Even if the stock stages a technical rebound, the gains will be just technical in nature," Miao said. "Few can be sure where the stock will find strong support."

HTC announced over the weekend that it sold a roughly 25 percent stake in Beats back to the U.S. company for US$150 million after it had acquired a 51 percent stake in the headphone maker in August 2011. The sale resulted in a loss of about US$4.88 million for HTC.

Referring to the August acquisition, HTC had said the two companies would create high performance sound for HTC devices.

Morgan Stanley said the move by HTC to sell back part of the company's Beats holdings indicated that the investment appears to have failed to create the synergies the two companies had previously expected.

(By Frances Huang)