Over the past several years, there has been a significant move towards the development of the mobile handset. For some companies, it has been a rewarding venture (Apple, Nokia) while for others it has been a struggle (Motorola, Siemens, Sanyo). A few that have been quietly changing the landscape of the handset market rather unnoticed such as HTC. WHO?
HTC is the Taiwanese company that provides cutting edge smart phone technologies. It was founded in 1997 as High Tech Computer Corp. (HTC). According to their own statements: HTC designs, manufactures and markets innovative, features for Smartphone and PDA Phone devices. Since its establishment, HTC has developed strong R&D capabilities, pioneered many new designs and product innovations, and launched state-of-the-art PDA Phones and Smartphones for mobile operators and distributors in Europe, the US, and Asia. These machines are available as HTC devices and as products individually customized for operator and device partners.
Just how are they growing? Well, let‘s put it this way, F A S T ! Over the past few years, revenues have accelerated due to the Microsoft partnership. This little known company has been serving up an amazing array of top shelf communication devices.
The latest breed will run the latest Windows Mobile 6, which by most reviews is going to be a major step towards real competition to the RIMM Blackberry device (RIMM) . There has been some recent talk about the potential for Microsoft to purchase RIMM . But the critics of this idea have a great point: The incompatibility of the devices will not make for an accretive transaction, unless one is simply removed from the market. That is a hard thought to believe as the RIMM has become the device of choice/need for government and enterprise businesses.
The HTC Advantage has been said to be the fastest and most powerful Windows Mobile device available. It will provide benefits of a true mobile office along with better push email technologies. (Still not as good as Blackberry Devices though)
The outlook for HTC continues to be bright as the product line up is rather amazing. The TOUCH (yes the touch) is the latest in the touch-screen line ups that has been available in Europe and Asia. The big question is what does this mean to the iPhone and Apple (AAPL)? The obvious question is: Who had the name first? As we all know by now, Apple introduced the iPod Touch this week to muted fanfare. There will surely be a backlash as the argument over name and trademarks will ensue.
In the end, the HTC partnership for Microsoft has been a breath of fresh air as they have been struggling with design issues for several years. One word sums this up: ZUNE. Never the less, with the addition of the latest HTC smartphones and the Windows Mobile 6, Microsoft should be able to maintain a decent share of this market as it is estimated that upwards of 30 new phone models will have
Several sources have estimated:
–Worldwide revenue for mobile phones is expected to total $117.5
billion in 2010, an 18% drop from 2006
— GSM phones made up 45% of worldwide mobile phone revenue in 2006,
smartphones made up 18%, and the remainder was made up by CDMA, W-CDMA, and CDMA2000 phone sales
— Worldwide revenue for the small but fast growing smartphone segment
grew 10% in 1Q07 from 4Q06, driven by the wider availability of 3G, which
unlocks the media application potential of smartphones beyond email
— In 2006, 20% of total mobile phone revenue came from North America,
34% from EMEA, 36% from Asia Pacific, and 10% from CALA
— The number of mobile subscribers grew 26% to 2.5 billion in 2006
The upshot for Microsoft is great, particularly as they gain share in the business market. With Microsoft‘s profit Margin of 27.5%, ROE of 52% and a 5 yr EPS growth rate of 11.54%, it is still a company worth owning. Would we buy now? YES! Under $30 is a price that will help to bring over the next few years. Don‘t expect for this to be a high-flier, rather a slow steady play.
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