HTC Falls to 17-Month Low Ahead of U.S. Ruling on Apple Patents

HTC Corp. (2498) fell to its lowest level in 17 months in Taipei trading as investors sold the stock on speculation a U.S. agency ruling tomorrow may result in a ban on importing handsets into its largest market.

HTC declined by its 7 percent daily limit to close at NT$448.50 on the Taiwan Stock Exchange, the lowest since July 2010. The stock was the biggest contributor (TWSE) to the benchmark Taiex index’s 0.6 percent drop. Trading volume of 12.8 million shares was 43 percent higher than the 90-day moving average.

The International Trade Commission will rule tomorrow on a complaint brought by Apple Inc. (AAPL) alleging patent infringement by HTC and seeking to block the Taoyuan, Taiwan-based company’s imports into the U.S. A win for HTC, the largest smartphone seller in the U.S. last quarter, could help it secure favorable terms in separate litigation brought by Apple.

“The ruling tomorrow is significant and the share decline shows investor concern about whether HTC will win or not,” said Aaron Jeng, who rates the stock “neutral” at Nomura Holdings Inc. in Taipei. “Sentiment has also been getting bearish since it cut its forecast for this quarter.”

HTC shares have dropped 21 percent, wiping out NT$100 billion ($3.3 billion) in market value, since Nov. 23 when it cut its fourth-quarter revenue forecast because of stronger competition and a weaker global economy. At least six brokers, including Citigroup Inc. and Credit Suisse Group AG cut their rating on the stock since the company revised its outlook.

Apple alleges HTC’s phones using Google Inc. (GOOG)’s Android operating system infringe four of its patents. Tomorrow’s decision will be the first of the agency’s final verdicts to be given as part of about a dozen cases it’s reviewing in relation to Android devices.

The agency may ban HTC phones from being imported into the U.S., while such a ban is not guaranteed even if it rules that violations did occur.

HTC has denied any infringement and says it has alternative solutions in case it’s found in violation of any patents. HTC handsets accounted for 24 percent of smartphones sold in the U.S. last quarter, ahead of Samsung Electronics Co. and Apple, according to researcher Canalys.

The case is In the Matter of Certain Personal Data and Mobile Communications Devices and Related Software, 337-710, U.S. International Trade Commission (Washington).

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

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.

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