HTC Slumps After Report Suspects Worked With Chengdu Government

HTC Corp. (2498), Taiwan’s biggest smartphone maker, slumped in Taipei trading after Next magazine reported that executives suspected of leaking designs were working with the government of Chengdu in southwestern China.

Shares plunged 6.8 percent to NT$137.50, the lowest since August 2005. Taiwan’s stock exchange has a 7 percent limit on stock moves in either direction. The benchmark Taiex fell 0.1 percent today.

Chengdu promised to fund plants, production and marketing for a new smartphone company if the HTC employees could pass over technology and a small amount of cash, Next reported, citing unidentified investigators. The employees are also suspected of stealing about NT$20 million ($671,000) from the company, the magazine said.

“This leaking incident following the departure of several executives raises the question of the company’s management ability,” Chris Chung, a Taipei-based analyst at President Securities, said by phone.

Steve Hung, an analyst at Mega Securities, said investors were also concerned the company’s August sales would fall and the company would miss its third quarter guidance.

HTC had revenue of NT$13.2 billion in August, the company said today after the close of trade. That is 45 percent below the sales posted a year earlier. The company, which forecast sales for the September quarter of NT$50 billion to NT$60 billion, has posted revenue of NT$28.9 billion for the first two months of the period.

Product Planning

Lorain Wong, a spokeswoman for Taoyuan City, Taiwan-based HTC, couldn’t immediately comment on Next’s report. An official with Chengdu’s Communist Party committee, surnamed Qiang, couldn’t immediately respond to the allegations when called by Bloomberg News.

Taiwan’s biggest maker of smartphones has said the criminal investigation into four of its employees won’t affect product planning in the fourth quarter, the company said on Sept. 2. Two product design executives have been detained, and two managers in research and development divisions were released on bail, according to the Taipei District Prosecutor’s Office.

HTC Chief Executive Officer Peter Chou was responsible for hiring the most senior member of the group of suspects, according to Next.

The company is “disappointed” and would improve the organization’s practices and processes, the Taipei-based Central News Agency reported, citing a Sept. 2 message to employees from Chou.

To contact the reporters on this story: Cindy Wang in Taipei at hwang61@bloomberg.net; Adela Lin in Taipei at alin95@bloomberg.net

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

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