July 18 (Bloomberg) -- HTC Corp., Asia’s second-biggest maker of smartphones, said it will buy back as much as 2.4 percent of its outstanding shares after a U.S. International Trade Commission ruled that it infringed two Apple Inc. patents.
HTC shares tumbled 6.5 percent last week to NT$907 ($31.40) in Taipei amid concern the patent dispute with Apple will erode earnings by crimping sales in the U.S. or boosting costs. They closed at a six-month low of NT$870 on July 13.
“The stock repurchase plan may stop the stock from falling” today, said Parker Wu, a fund manager overseeing NT$4 billion for Taipei-based Agriculture Bank of Taiwan, who doesn’t own HTC shares. “Longer term, it’ll depend on how the lawsuit goes and the attitude of foreign investors, as they control more than half of HTC’s shares.”
The company, based in Taoyuan, northern Taiwan, will purchase as many as 20 million of its own shares by Sept. 17, according to filings to the Taiwan stock exchange on July 16. Half of the repurchased shares will be transferred to employees, and the remainder canceled.
HTC said on July 16 it will appeal a ruling by a U.S. judge that the company infringed two Apple patents. Administrative Law Judge Carl Charneski’s July 15 finding is subject to review by the full six-member International Trade Commission in Washington.
Should the commission uphold the finding, the U.S. may ban imports of some HTC phones that run on Google Inc.’s Android, the nation’s most popular smartphone operating system.
“This isn’t the worst-case scenario for HTC, which was found not to violate the other eight patents in the case,” Michael On, president of Taipei-based Beyond Asset Management Co., who doesn’t own the company’s shares, said yesterday. “They will probably resolve the issue by paying royalties, which will raise costs.” He declined to disclose the size of his assets.
HTC and Apple more than doubled mobile phone revenue from a year earlier in the first quarter as they shipped their products to more markets around the globe.
Apple, once best known for its Mac computers, now relies on iPhones for about 50 percent of sales and the iPad tablet for 12 percent, according to first-quarter figures compiled by Bloomberg.
--Editors: Paul Tighe, Jim McDonald
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