HTC to buy back shares after patent ruling

HTC Corp, Asia’s second-biggest maker of smartphones, plans to buy back as much as 2.4 per cent of its outstanding shares after a US International Trade Commission ruled that it infringed two Apple Inc patents.

The company, based in Taoyuan, northern Taiwan, will purchase as many as 20 million of its own shares by September 17, according to filings to the Taiwan stock exchange yesterday. Half of the repurchased shares will be transferred to employees, and the remainder canceled.

HTC shares tumbled 6.5 per cent last week to NT$907 in Taipei amid concern the patent dispute with Apple will affect earnings by crimping sales in the US 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 on Monday,” said Parker Wu, a fund manager overseeing NT$4 billion ($138 million) for Taipei-based Agriculture Bank of Taiwan, who doesn’t own any stake. “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.”

HTC said yesterday that it’ll appeal a ruling by a US 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 US may ban imports of some HTC phones that run on Google Inc’s Android, the nation’s most popular smartphone operating system.

ROYALTIES POSSIBLE
“This isn’t the worst-case scenario for HTC, which was found not to violate the other eight patents in the case,” said Michael On, president of Taipei-based Beyond Asset Management Co, who doesn’t own the company’s shares. “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 revenue from mobile phones in the first quarter from a year earlier as they shipped their products to more markets around the globe. Apple, once best known for its Mac computers, now relies on its iPhone for about 50 per cent of sales and the iPad tablet for 12 per cent, according to first-quarter figures compiled by Bloomberg.