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Company News

UPDATE 1-HTC Q1 rev picks up; margins hit by competition

* Q1 revenue up 7 pct y/y to about T$32-34 bln

* Q1 gross margins down to about 30 pct from 32 pct in Q4

* Q1 OPEX ratio about 17 pct, flat from Q4’s 17.2 pct

* Shares have fallen 15 pct since July

(Adds details, quotes, background)

TAIPEI, Jan 26 (Reuters) - HTC 2498.TW, the world's No. 4 smartphone brand, expects revenues to grow by up to 7 percent in the first quarter from the same period in 2009, helped by improving demand for the feature-jammed gadgets.

Revenue in the first quarter will likely rise to between T$32-34 billion ($1 billion), the company said in a statement posted on its website, higher than the T$31.6 billion recorded a year ago.

Gross profit margins will fall to about 30 percent from 32 percent in the fourth quarter, it added, while first-quarter operating expenses should remain flat from the preceding three months at about 17 percent.

“The margin they’re forecasting is a little worse than I’d expected,” said Arthur Hsieh, an analyst at UBS. “But that’s something they’ll have to accept, because prices will come down if HTC wants to target the mass market.”

The company released the statement after the Taiwan stock exchange closed on Tuesday. Its shares were down 1.91 percent, beating a 3.48 percent fall in the benchmark TAIEX .TWII share index.

HTC shares have fallen more than 15 percent since July last year, when it drastically cut its full-year revenue outlook. It said then that it would be introducing lower-priced models to target developing markets such as China.

“We retain our long-term bullish tone on China smart phone growth potential and likely a big revenue contributor to our growth in the next couple years,” it said.

Earlier this month, Google GOOG.O launched its own-brand Nexus One smartphone manufactured by HTC, a move some analysts expect may help the Taiwanese handset brand improve sales. [ID:nN04199072]

“(This will have) a strong leverage to enhance HTC brand awareness via this highly anticipated product globally,” it said in the statement.

The phone will run on Google's Android operating system, which competes against other software such as Microsoft's MSFT.O Windows Mobile system and Nokia's NOK1V.HE Symbian system for dominance of the sector.

HTC ranks behind bigger smartphone rivals Nokia, Blackberry maker Research in Motion RIM.TORIMM.O and iPhone maker Apple AAPL.O in the global smartphone charts, research firm IDC said.

IDC also forecasts shipments of smartphones to rise about 20 percent in 2010, outperforming most other electronic gadgets such as personal computers. (Reporting by Kelvin Soh and Roger Tung; Editing by Ken Wills)

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