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MENAFN - Khaleej Times - 28/09/2013
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(MENAFN - Khaleej Times) HTC Corp, the Taiwanese smartphone vendor whose stock has plunged 90 per cent since 2011, is selling its remaining stake in headphone maker Beats Electronics LLC for 265 million.
HTC will close the sale of its 24.84 per cent stake in the closely held company in the fourth quarter, and it expects a NT2.52 billion (85 million) pretax profit, according to a statement to Taiwan's stock exchange. Beats, founded by music producer Jimmy Iovine and rapper Dr Dre, also will repay a 150 million promissory note, plus accrued interest.

The deal comes two years after HTC took a 51 per cent stake in Beats for 300 million and started using the Santa Monica, California-based company's sound technology. HTC since has struggled to compete with devices from Samsung Electronics Co and Apple, with its market share falling to less than 3 per cent of the 280 billion smartphone industry.

"For HTC it puts more cash in the bank, and they need cash now that they have turned operating cash flow negative," said Jean-Louis Lafayeedney, an analyst at JI Asia in Hong Kong. "Investors have been asking HTC to shed assets and get cash back to help them regain profitability."

Separately, Beats said Carlyle Group LP will make a minority investment, with the deal expected to close in the fourth quarter. The terms were not disclosed.

Beats' technology has been used in Hewlett-Packard Co. computers and Chrysler Group LLC cars. The headphone maker last year purchased the MOG music-streaming service to add high-quality soundtracks and playlists to its devices.

HTC, the first maker of phones using software from Google, was a contract manufacturer before it began promoting its own brand in 2006. The company had a short-lived reign at the top of the US market in the third quarter of 2011, when it accounted for 24 per cent of smartphone shipments, according to researcher Canalys.

HTC's share of the global smartphone market fell to 2.8 per cent in the second quarter, from 5.8 per cent a year earlier, according to data compiled by Bloomberg. The company enlisted actor Robert Downey Jr. to promote its smartphone brand in a two-year global marketing deal worth about 12 million, two people with knowledge of the plans said in June.

The company in February 2012 said it had "dropped the ball" on products, pointing to weaknesses in design and engineering. The HTC One, which was supposed to herald a reversal of fortune, has so far failed to stop a slide in the company's sales since the phone's introduction was delayed to the same timeframe as Samsung's flagship Galaxy S4.

 


Khaleej Times




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