However, HTC has become active in engaging Quanta Computer Inc. and Wistron Corp., both original design manufacturers (ODM), in subcontracting the production of mid-range and entry-level phones for the China market, according to Alvin Kwock, an analyst with J.P. Morgan in Hong Kong.
"Thus, we suspect that HTC might not consider a merger scenario right now," Kwock
wrote in the report, in which he
maintained an "underweight" rating on the stock with a price target of NT$100 (US$3.38).
The analyst expects HTC's
third-quarter sales to reach the low end or fall short of the company's guidance at NT$50 billion-NT$60 billion, as HTC
has limited flexibility for cutting its prices to compete against other Android phones, leading to a shorter-than-expected life cycle for its flagship phone, the HTC One.
To limit the magnitude of loss, Kwock
must cut back on its operating expenses and marketing budget, making a recovery in coming quarters even tougher for the Taiwanese firm.
"We also believe that the financial loss may continue but will not be enough to create financial stress, although this could change when a bigger iPhone arrives," he