HTC Market Value Passes Nokia as Smartphones ‘Change Mindsets’

HTC Corp. (2498), Asia’s second-largest maker of smartphones, passed Nokia Oyj (NOK1V)’s market value as consumers switch to more powerful, feature-rich phones at the expense of the Finnish maker’s simpler models.

The 5.3 percent gain of HTC shares in Taipei trading yesterday took the Taoyuan, Taiwan-based company’s market value to $33.8 billion, exceeding the $33.6 billion value of its competitor. Nokia climbed 1.1 percent to 6.26 euros. HTC shares closed unchanged today.

HTC stock tripled in the past year as smartphone shipments grew at more than twice the pace of the wider market for mobile handsets. Nokia shares slumped 19 percent this year as competition for basic phones intensified and the company’s Symbian operating system for high-end models lost ground to Apple Inc. (AAPL)’s iOS and Google Inc. (GOOG)’s Android.

“Smartphones have changed the mindset of consumers,” said Jeff Pu, who rates HTC “buy” at Fubon Financial Holdings in Taipei. “Previously people went into a store and asked for Nokia or LG. Now they ask for Apple and HTC.”

Smartphone Growth

Global shipments of smartphones climbed 72 percent last year, more than double the 32 percent growth in the wider mobile devices market, researcher Gartner Inc. said in a Feb. 9 statement. Smartphones accounted for 19 percent of shipments for the year, it said.

HTC’s 33 percent surge in market value this year means it now lags behind only Apple, maker of the iPhone and iOS operating system, and Samsung Electronics Co., which uses both Android and Windows in its handsets, among smartphone manufacturers.

Nokia’s market share dropped to 28.9 percent last year from 36.4 percent in 2009 because of stiffer competition in low-end phones and the failure to match rivals’ offerings of high-end phones, Gartner said. Nokia maintained the overall lead, selling 461 million units in 2010. HTC sold 24.7 million devices for the year, Gartner said.

Smartphones, which command a higher price and wider margins than normal phones, accounted for 23 percent of Nokia’s shipments in the fourth quarter, according to estimates from Credit Insights Inc.

Debt Rating

Standard & Poor’s on March 30 cut its debt rating on Nokia for the first time. “High competitive pressure” will push the operating margin on Nokia phones lower in the next two years as it makes “further significant market share losses,” S&P said at the time.

HTC’s operating margin, which measures the percentage of sales less the cost of manufacturing and sales, was 16 percent in the quarter ended Dec. 31. Nokia’s was 7 percent. Of 36 analyst recommendations compiled by Bloomberg, 29 say investors should buy HTC shares while none say sell. Nokia has 23 “sell” ratings and 19 “buy” recommendations.

Photographer: Denis Doyle/Bloomberg

An HTC Incredible S smartphone. Close

An HTC Incredible S smartphone.

Close
Open
Photographer: Denis Doyle/Bloomberg

An HTC Incredible S smartphone.

Nokia in February announced it would adopt Microsoft’s Windows platform as its primary operating system for phones, helping it cut its $4 billion budget for research and development in its devices division.

As Nokia moves into Windows models, HTC’s growth will be driven by its Android handsets, Fubon’s Pu said. Global smartphone shipments will climb 50 percent this year and Android will become the leading operating system for the devices, ahead of Research in Motion Ltd. (RIM)’s BlackBerry and Apple’s iOs, IDC said in a March 29 statement.

At NT$1,200 per share, HTC’s stock is the most expensive in the Taiwan market. Pu today raised his price estimate on the stock for the tenth time in the past year to NT$1,500, citing continued sales and shipment growth.

“Most clients agree with our view that the smartphone growth story is intact for 2011,” Richard Ko, a Taipei-based analyst at KGI Securities Co. wrote in a report yesterday, citing conversations with the brokerage’s customers in Hong Kong and Singapore. “Investors we spoke with generally agree that HTC’s 2011 shipments will outperform the industry by a significant margin.”

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.