UPDATE 1-HTC's weak Q4 points to tougher days ahead

* Q4 net profit T$5.579 bln, mkt f’cast T$7.18 bln

* Weighed down by falling prices and increasing competition

* Shares give up gains to close up 0.4 pct, lagging big board (Adds details, quotes, background)

TAIPEI, Jan 6 (Reuters) - HTC 2498.TW, the world's No. 4 smartphone brand, reported weaker-than-expected fourth-quarter results on Wednesday, weighed down by increasing competition and rapidly falling prices for feature-jammed gadgets.

The company made a net profit of T$5.579 billion ($175 million) in the fourth quarter of 2009, it said in a statement posted on its website, worse than market expectations for T$7.18 billion and lower than the T$8.09 billion recorded a year ago.

“Prices are falling and competition is intensifying,” said John Chiu, vice-president at Fuh Hwa Securities Investment Trust. “Although there’s a lot of opportunity for growth, competition is increasingly intense and this will definitely eat into margins.”

The company did not release any forward-looking guidance in the statement, but usually holds a conference call at the end of the month when it announces its results.

HTC will manufacture a Google GOOG.O branded cellphone from this month, the two companies said on Tuesday, in a move that could help the Taiwanese handset maker improve sales. [ID:nN04199072]

The smartphone market is expected to grow by about 20 percent in 2010 from last year, research firm IDC said, outperforming its bigger cousin the PC.

Cellphone giant Nokia NOK1V.HE, Blackberry maker Research in Motion RIM.TORIMM.O and iPhone maker Apple AAPL.O together take up about three quarters of the entire smartphone market.

“It’s going to be an increasingly difficult market to compete in, with all these big PC brands and other cellphone makers stepping up on their marketing efforts,” said Fuh Hwa’s Chiu.

PC makers such as Acer 2353.TW, Dell DELL.O and Asustek 2357.TW have all announced plans to release their own branded smartphones, while Lenovo 0992.HK has also said it will release smartphones in China.

HTC shares lost ground after the results were released, giving up gains of over 2 percent in earlier trade to close the session up 0.4 percent, and lagging a 1.42 percent advance on the benchmark TAIEX share index .TWII.

Reporting by Kelvin Soh; Editing by Jonathan Hopfner