HTC may remain profitable with Beats exit

Analysts say the Taiwanese smartphone maker may remain profitable in 2013 after it announced plans last week to sell its remaining shares in Beats Electronics for US$265 million.
Written by Chiu Yu-Tzu, Contributor

HTC may have announced plans to relinquish its shares in U.S. high-end headphones maker, Beats Electronics, but analysts say the sale could help the Taiwan smartphone maker stay profitable in 2013.

HTC will sell its remaining 24.84 percent stake back to Beats for US$265 million.

HTC last week said it would sell its remaining 24.84 percent stake in Beats back to the headphones maker for US$265 million. According to its statement to the Taiwan Stock Exchange dated September 27, Beats will buy back the remaining stake held in it by HTC. It will repay a US$150 million loan back to HTC in the transaction which is expected to be completed in the fourth quarter of this year. 

HTC, which stressed that Beats will remain an important partner, said the stake sale was expected to generate about NT$2.52 billion (US$85.4 million) in pretax profit.  The Taiwanese company in 2011 bought a 51 percent stake in the high-end headphones maker for US$300 million dollars, but sold half of it back in November 2012 for US$150 million.

According to a report Saturday by Taiwan's state-run Central News Agency, analysts remained positive on HTC's performance in 2013. MaterLink Securities' analyst Tom Tang said in the report: "HTC is struggling amid fiercer than ever competition in the global smartphone market. The gains from the sale of the Beats stake is expected to strengthen HTC's bottomline and help the smartphone vendor remain profitable this year."

Citing Merrill Lynch's analysis, though, the report noted that even with the benefits from the Beats deal, HTC faced challenges from unsatisfactory sale of the HTC One and intensifying market competition.

In addition, the recent departure of its design team may affect the introduction of the company's new products. The HTC designers in late-August were arrested by the Taipei District Court for allegedly leaking trade secrets. However, the management said the case was unlikely to impacts its operations

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