Autor: Marry • April 20, 2011 • Case Study • 397 Words (2 Pages) • 981 Views
We currently recommend that HTC as a buy decision due to the share price being undervalued by 100%. Through our DCF analysis we valued the share price at $2.34, compared currently at $1.28. With the collaboration of Google, HTC generated more than a third of total sales in 2009 due to the Android breakthrough. This seems to be a promising company in the future, although we feel the company will need to be assessed periodically as the company looks to expand.
Due to Apple creating a price ceiling of $200 for premium products, HTC will need to adapt to the markets demands. HTC should focus less on Microsoft Platform's due to licensing fees, which represented their second biggest expense. Additionally, HTC's revenue on Microsoft Platforms greatly decreased from 84% to 51% in just four years. By doing this HTC will be able to invest more money in the Android based phones. Since HTC release of the Android platforms they have accumulated to 49% of HTC's revenue.
EMERGING AS A TECHNOLOGICAL LEADER
As of 2007 HTC officially started the brand strategy with HTC branded phones available for sale in Europe and Asia. Due to the brand strategy HTC showed higher expenses, but the major part of these expenses went into R&D. Chou and Wang believed that the key to creating a powerful brand was to focus on R&D to produce cutting-edge smartphones. All these expenses on brand strategy will mean that HTC must find ways to achieve greater economies of scale.
With all the heavy expenses coming in through the brand strategy, we examined the company's liquidity. Even with all the expenses, we were able to find through the current ratio for 2007 (2.42), and 2008 (1.85) that the subsequent growth in 2007-2008 adequately cover liabilities. The debt ratio has shown increase from 2007 to 2008, changing from 38% to 47.35%. We found this increase as expected due to the new strategy, but for 1Q2009 we calculated 41.93% which allows us to assume that the company is on the right path.
HTC is one of the world's leading developers and manufactures of Windows OS based pocket PCs, wireless PDA, and smartphones. The company carries out both ODM and own brand business under the name HTC, and also supplies customized communication products to wireless operators around the world. HTC achieved an estimated global CE-based pocket PC market share of 68% in 2007.