S3G currently licenses its texture compression technology to global IT companies including Microsoft, Sony and Nintendo. More importantly, the ITC (International Trade Commission) made a preliminary ruling on 1 July 2011 that Apple has infringed two of S3G's four patent claims on its iOS products. We think HTC's IP acquisition on S3G not only aims to enhance its own graphic technology in smartphones/tablets, but to bolster the case against Apple during the pending lawsuit between the two parties.
Given the timing, HTC is likely to close the S3 deal and then file a countersuit against Apple revolving around graphics patents.
Separately, HTC reported that its second quarter net income doubled to NT$17.5 billion ($608 million) on strong sales of devices like its Thunderbolt. Revenue for the second quarter was NT$124.4 billion ($4.3 billion).