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HTC Overtakes Nokia in Market Value

Robin Kwong in Taipei
Wednesday, 6 Jul 2011 | 11:27 PM ET

Taiwan’s HTC has overtaken Nokia in terms of market value, highlighting a changing of the guard in the mobile phone industry as a raft of new entrants have challenged the Finnish company’s dominance of the sector.

A visitor examines an HTC smartphone at the Vodafone stand at the CeBIT Technology Fair in Hannover, Germany.
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A visitor examines an HTC smartphone at the Vodafone stand at the CeBIT Technology Fair in Hannover, Germany.

Also, credit rating agency Moody’s on Thursday cut Nokia from A2 to A3, citing its weakening market position and uncertainty over its transition to Microsoft’s Windows Phone software.

HTC shares were unchanged on Thursday after rising 5.3 percent to T$1200 on Wednesday, valuing it at US$33.8bn. Shares in Nokia were up 1 percent on Wednesday, giving it a market value of US$33.4bn.

HTC has now become the world’s third most valuable smartphone maker, and bigger on that measure than either Sony or LG Electronics, according to Thomson Reuters.

It is still smaller than Apple and Samsung Electronics, although unlike those two companies, the smartphone is the Taiwanese company’s sole business.

HTC is also the only smartphone maker, besides Apple, whose shares have risen this year. Its shares have risen by a third, while Nokia’s have fallen by a fifth over the same period.

Nokia remains the world’s biggest producer of mobile devices by volume, with a 28.9 percent global market share at the end of last year, according to Gartner.

HTC’s rapid rise reflects the speed with which touchscreen-based smartphones have become a mass-market product in Europe and the US. While growth is expected to slow this year compared with last, the global smartphone market is still expected to increase 50 percent, according to IDC.

Many mobile phonemakers were caught off guard by this rapid change.

Nokia has found its leadership position eroded by Apple’s iPhone and Android-based phonemakers such as HTC. It underwent a high-profile management reshuffle last year, with Stephen Elop, the new chief executive, likening the company’s predicament to a man on a “burning platform”.

HTC was founded in 1997 and for its first 11 years was a little-known contract manufacturer for other brands. It made the world’s first Android-based phone for T-Mobile in 2008 and took advantage of the 18-month-long period when it was the sole producer of such phones to grow quickly in size.

CK Cheng, analyst at CLSA, the equity brokerage, says that HTC’s scale means that “in times of tightness in the supply chain, such as now after the Japan earthquake, all the suppliers are going to ensure that Apple and HTC get their orders filled first rather than Motorola or Sony Ericsson”.

The rally in HTC’s shares also reflect the fact that it has been quick to fill the nascent market for phones running on much faster, fourth-generation networks. In the US, HTC’s Evo Shift, for Sprint’s network, and its Thunderbolt, for Verizon, are currently the only two 4G smartphones available on the market, although competing devices will soon be launched.

“Even if it is just a one-or two-month lead, it is still a significant advantage,” Mr Cheng said.

However, some analysts, such as Morgan Stanley’s Jasmine Lu, worry that HTC would face increasing headwinds as competitors catch up, and may see its profit margins fall if low or mid-ranged smartphone models grow in popularity at the expense of premium models.

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