HTC shares tumble as patent case delays U.S. sales
TAIPEI (Reuters) - U.S. sales of two new smartphones from Taiwan's HTC Corp will be delayed due to a patent dispute with Apple Inc, a fresh blow to the company as it tries to turn around declining sales in what was once its largest market.
Shares in HTC tumbled more than 6 percent after it said shipments of the phones were being held up by U.S. customs officials.
Apple scored a narrow victory against HTC in a patent lawsuit in December over technology in the smartphones, one of many such disputes in the fiercely competitive smartphone market.
HTC said in a statement on Wednesday that "the U.S. availability of the HTC One X and HTC EVO 4G LTE has been delayed due to a standard U.S. Customs review of shipments that is required after an ITC (International Trade Commission) exclusion order".
The two models are the first devices to be delayed since that ruling, which said that HTC phones with the disputed technology would be banned from entering the U.S. from April 19. HTC has said that it has a workaround in its new phones to avoid the technology, but the shipments still require inspection.
HTC said it was keeping its second quarter revenue guidance unchanged at TW$105 billion ($3.56 billion).
FALL FROM GRACE
Former contract maker HTC had a fairytale ride in 2010 and early 2011, when its shares more than tripled in the 14 months to April 2011. The company's sales grew four-fold in 1-1/2 years as consumers snapped up its innovative phones with their distinctive large clock numerals.
But it suffered an equally rapid fall from grace as its phones failed to keep up with Apple's iPhones and Samsung's Galaxy range.
Some shipments of the One X model had reached the U.S. before the ban date, enabling the model's launch, but further shipments are being held up, an HTC official in Taipei said.
U.S. operator AT&T, which has been carrying the One X model in store since May 6, says the smartphone is "out of stock" on its website.
The launch of the EVO 4G LTE by Sprint, originally scheduled for Friday, will be delayed. Sprint has been taking pre-orders on its website.
In its statement, HTC said it believes it was "in compliance with the ruling and HTC is working closely with customs to secure approval". Sprint and AT&T both declined to comment.
HTC shares closed down over 6 percent in a broader market down 2.2 percent.
"It's really hard to tell how much longer the phones will be held up at the customs because the review has already taken a month," said Bonnie Chang, an analyst of Yuanta Securities.
She said although some HTC One X stocks were available for sale because they had already passed through customs and were with dealers, the quantity was unknown and third-quarter sales could be affected if there were not enough to meet demand.
But second-quarter revenue would be unaffected, she added, if the customs review could be completed within a week or two, as revenue from the shipments had already been recognized for the quarter once they were shipped out from Taiwan.
Some brokerages, however, expressed concern at the implications of the longer-than-expected customs review process.
"Previously, it was expected that general exclusion order from the patent infringement referred to only old models from HTC," Goldman Sachs said in a trading note to clients seen by Reuters. "However, the latest news suggest otherwise with all models (new and old) potentially at risk."
It said the U.S. market was expected to account for 15-20 percent of HTC's second-quarter shipments, and this delay might hit the company's earnings this quarter and possibly in the third quarter, depending on how quickly HTC could resolve the issue.
Last month, HTC Chief Executive Officer Peter Chou said HTC would not return to the days when more than 50 percent of its revenue came from the United States, a market where it saw a big drop last year because of the fierce competition from Apple's iPhone 4S.
In late February, HTC announced its One series of models aimed at leading its fight back against Apple and Samsung, with fast graphic chips and advanced music and photography functions, to generally positive reviews from analysts and tech bloggers.
($1 = 29.4860 Taiwan dollars)