Research Statement Htc Dissertation

October doze, 2010

Pierre Ferragu (Senior Analyst) • pierre. [email protected] com • +44-207-170-5005 Jasmeet Chadha • jasmeet. [email protected] com • +44-207-170-0528

HTC - Initiating Coverage: The very best of All Identical dwellings. Outperform Insurance coverage Initiation

11/10/2010 Closing Value 715. 00 458. 82 Target Selling price 1100. 00 TTM Rel. Perf. tips. 4% EPS 2009A twenty eight. 18 3. 63 2010E 47. 57 31. 02 2011E seventy four. 32 35. 63 2009A 25. 5 19. 4 P/E 2010E 15. 0 14. 8 2011E being unfaithful. 6 12. 9 Deliver 3. 6% 2 . 7%

Ticker 2498. TT MXAPJ

Rating To

CUR TWD

O – Outperform, M – Market-Perform, U – Underperform, And – Not really Rated

Highlights

HTC sounds like an early champion in the significant shifts we are currently watching in the handset industry, and if investors possess started to understand the situation (the stock outperformed its index by much more than 100% YTD), we still see significant further upside. We anticipate EPS 26% above consensus next year, 45% in 2012. We believe that Android os, the os developed by Google provides a decisive competitive edge to companies adopting this. As a consequence these manufacturers are gaining business, and against conventional knowledge, they get a positive progress their pricing power. Because context, we feel HTC is incredibly well located. The company has the best technological capabilities, the best cost basic and is swiftly building a solid brand value. The the latest acceleration with the smartphone trend coupled with the company's strength give HTC an unusually solid growth and profitability improvement potential. We expect the company to increase earnings by 69% this coming year and by 56% next year.

Global Telecom Gear

The paradigm set by simply Touchscreen mobile phones and Android os has had a profound impact on the cellular phone industry.  We see two major alterations happening today: 1) Increasingly more of the aim features that consumers worry about are computer software defined or at least depend greatly on the software program platform of the phone; 2) Android is successfully creating an independent software layer.  These changes are greatly impacting the competitive scenery. Software has brought in a couple of new Essential Success Elements: first ocasionar advantage and software advancement capabilities. Unsurprisingly, this has a new disequilibrium in the competitive landscape, to the drawback to the largest incumbents.  While an immediate result, The War of Identical dwellings has begun. Because it concentrates very strong Key Accomplishment Factors, Android os is providing an second existence to subscale branded players and the system represents a unique opportunity for unbranded Asian producers to take significant market share.  Against typical wisdom, we feel Android may have a positive influence on margins of manufacturers, in least inside the medium term, and most most likely a fairly neutral effect on the general profit pool of the market, which indicates pressure about margins of players with an inferior operating system.

See Disclosure Appendix of this publication intended for important disclosures and expert certifications.

Oct 12, 2010 Pierre Ferragu (Senior Analyst)

• calcul. [email protected] com • +44-207-170-5005

In such a circumstance, we believe HTC is very very well positioned.  On the specialized front, we come across HTC since the best situated Android-backed participant. Developing Android phone takes a significant and nontrivial efforts to pull together the right consumer experience on the right components platform. THE ALL NEW HTC launched the first business Android phone in October '08 and has generated since then an important time-and-experience-based competitive advantage.  HTC is definitely rapidly building a strong company equity, building on the industry�s technical leadership. Several indications show the HTC manufacturer is getting very strong impetus. In european markets, HTC's brand consciousness increased coming from ~10% last year to > 40% this season. Globally, THE NEW HTC has the best shelf awareness of all android-backed manufacturers and most importantly, many surveys show a very high degree of user...

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