Ubs on Htc

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UBS Investment Research HTC Corporation

From growth to value

Too much or not enough competition? We believe general consumers would be confused by the vast range of choices in the smartphone market and HTC needs more competitors in the Android market segment to promote the benefits of this platform, given that carrier endorsement alone may not be enough. We think more aggressive marketing by HTC, its rivals, wireless carriers and even Google should help to expedite the market acceptance. Near term constraints from the lack of a proprietary OS We think the main reason behind HTC’s 2009 guidance cut is due to the delay of Android software release and it could take time for HTC to overcome these issues on its own. We point out the risk could diminish as Android becomes more mature in the future as HTC has demonstrated that it is not constrained by the software release schedule delay of Windows Mobile OS. Dominant position in Windows phones remains intact Our checks suggest HTC could introduce its capacitive touch-based Windows phone in October although MSFT won’t include this feature until Feb. 2010. We believe further improvement of “HTC Sense” is critical for its differentiation. Valuation: Retain Buy rating; lower PT to NT$375 We lower our 2009E/10E/11E EPS from NT$34.22/NT$37.90/NT$42.30 to NT$29.22/NT$30.61/NT$33.22 to reflect a potential higher sales mix of lower price models and in turn we cut our PT from NT$493 to NT$375 based on UBS VCAM model. We think HTC offers good value as it delivers one of the highest ROE and cash dividend yield among peers and yet it is trading at the trough PBR.

Global Equity Research

Taiwan Computers 12-month rating 12m price target Price

Buy *

Unchanged

NT$375.00/US$11.43 Prior: NT$493.00/US$15.03 NT$328.00/US$10.00

RIC: 2498.TW BBG: 2498 TT

5 August 2009

Trading data (local/US$) 52-wk range Market cap. Shares o/s Free float Avg. daily volume ('000) Avg. daily value (NT$m) Balance sheet data 12/09E...