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Talk of the Day -- 3 tactics may help HTC out of tight spot

2012/06/08 21:58:46

Taiwanese smartphone vendor HTC Corp. appears to be facing a perfect storm of converging challenges that include patent battles with rival companies and sluggish sales in the debt crisis-hit eurozone.

Its share price closed at a 27-month low of NT$352 (US$11.77) Friday after shedding a combined total of 13.3 percent in the past two trading sessions.

According to local media reports, 10 foreign financial institutions have cut their target prices for HTC shares to between NT$320 and NT$230, and three of them have even lowered the company's credit ratings.

Some market analysts said that as the global smartphone market is increasingly dominated by two giant conglomerates -- Apple Inc. and Samsung Electronics -- smaller players like HTC might be driven into the shadows.

However, HTC sources said the company has drawn up three strategies to bring it back into the limelight: betting on the vast Chinese market; promoting sales of its highly profitable One series of devices; and beefing up its brand popularity.

The following are excerpts from the local media coverage of HTC's challenges and its breakout tactics:

Economic Daily News:

HTC will celebrate its 15th founding anniversary June 13. The recent sell-off of its shares marked the third time that the company faced a big crisis.

The first one came in 2006 when it decided to develop its own brand at the expense of its contract manufacturing service business.

It hit a snag again in 2009 when a global financial crunch prompted HTC to largely lower its sales estimates.

Looking back at those times, foreign institutional investors almost unanimously gave pessimistic forecasts for the company's fortune. Thanks to its resilience, the company managed to bounce back on both occasions. It remains to be seen whether HTC can overcome all of its current challenges and emerge even stronger than ever, market analysts said.

HTC Chief Executive Peter Chou once said the company is not afraid of competition or challenges because they would only help push the company to reinvent itself and become even stronger.

In the face of less-than-ideal sales in the U.S. and European markets, HTC has focused on penetrating the Chinese market since the beginning of this year, industry sources said.

The company will expand the number of its retail outlets in China from the current 2,000 to 4,000 by the end of the year, the sources said.

A well-devised distribution network, brand recognition and product quality will play critical roles in HTC's efforts to maintain its market competitiveness.

According to Chou, HTC has won trust from Chinese consumers as China's three telecommunications service providers have all asked the company to launch customized smartphones with a price tag of 2,000 Chinese yuan instead gadgets worth 1,000 yuan or less.

"This fact underlines HTC's brand value in the Chinese market," said an HTC source.

Moreover, the source said, the company's gross margin remains at 27 percent even after its Q2 sales forecast has been cut by 13 percent. He attributed the maintenance of its gross margin in part to relatively high profitability of its One series of devices. (June 8, 2012).

United Evening News:

Ever more intense competition from rivals -- Apple Inc. and Samsung Electronics in particular -- has driven HTC into a predicament.

Weak sales in Europe are a given and it is also facing lackluster sales in the U.S. due to shipment delays for some models starting in April.

Patent disputes with Apple, Nokia and Peregrine Semiconductor may also hinder its new business promotion plans, industry insiders said.

HTC once topped other brands in the smartphone markets in advanced countries. Whether it can regain its dominance will depend on its ability to renovate and innovate, market mavens said. (June 8, 2012).

(By Sofia Wu)