Taipei: Shares of HTC Corp jumped by their permitted daily limit on Monday after the Taiwanese smartphone maker announced a global patent settlement and 10-year licensing agreement with Apple Inc, allowing the struggling company to focus on product development.
The settlement would give HTC a short-term boost, analysts suggested, but long-term performance would still depend on the company's ability to deliver competitive products to grab back some of the market share it has lost to Apple and South Korea's Samsung Electronics Co.
HTC's shares opened up by the maximum allowed 6.86 per cent at T$241.50, and remained at that level in morning trade in a broader market that slipped 0.15 per cent.
The settlement would give HTC a short-term boost, analysts suggested.
The shares have bounced 24.5 per cent from a closing low of T$194 two weeks ago, which was the lowest since 2005 before the company transformed into a top brand from an obscure contract maker. But the shares remain some 80 percent below their record high last April.
HTC and Apple's settlement and licensing agreement on Saturday ended one of the first major conflagrations of the smartphone patent wars. The California giant sued HTC in 2010, its first major legal salvo against a manufacturer that used Google's Android operating system.
"The licensing agreement is beneficial to HTC's future product development, especially in the US market," said Gartner analyst C.K. Lu.
"The settlement is positive to the consumer image of both camps (Apple and Google) as they are now unlocked from a constant patent war."
The two companies did not disclose details of the settlement or the licensing agreement, but HTC said the agreement will not impact its financials and it will not change its fourth-quarter guidance.
HTC said last month it expected its fourth-quarter revenue to be about T$60 billion ($2.05 billion), down from T$70.2 billion in the third quarter and below expectations of T$74.0 billion in a poll of 23 analysts by Reuters.
It expected a gross margin and an operating margin of around 23 percent and 1 percent, respectively, falling from 25 percent and 7 percent in the previous quarter.
The company said the operating margin would be hit by higher spending on marketing.
Analysts' forecasts on how much HTC needs to pay Apple range from "not a very high price" to as much as over $10 per phone, though they remain best guesses, based partly on the assumed $10 royalty that phone makers pay Microsoft per Windows 7 phone, and on the $5-6 dollar that Android phone makers are believed to pay Microsoft after a separate lawsuit last year.
However, some analysts warn that HTC's other challenges outweigh the settlement.
Its phones have lost a lot of their appeal among consumers as Apple's iPhones and Samsung's Galaxy series dominate shopping lists, drawing parallels with the decline of Finland's Nokia, once one of the dominant mobile phone players.
"Nokia settled with Apple in 2011 by winning royalties from Apple, but it did not change the landscape at all for smartphone competition. Samsung continued to win market share despite the losses to Apple," wrote Barclays analyst Dale Gai in a research note.
"We believe the lawsuits remain non-events in terms of HTC's fundamentals. HTC's challenges remain and could get worse into 2013 from more competition."
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