Deutsche Bank upbeat on HTC’s new stake


TAIPEI — Taiwanese smartphone vendor HTC Corp. has made some poor investment decisions in recent years, but its acquisition of a stake in Magnet Systems Inc. could pay off by boosting its competitiveness, Deutsche Bank AG said in a research note.

On Aug. 20, HTC announced it would invest US$35 million to buy a 17.1-percent stake in enterprise platform company Magnet Systems after noting that it will book an investment loss of US$40 million from its stake in cloud gaming provider OnLive Inc.

In July, HTC also decided to sell back half of a 51 percent stake it owned in U.S.-based headphone maker Beats Electronics less than one year after the acquisition. The sale resulted in a loss of about US$4.88 million for HTC.

William Yang, an analyst at Deutsche Bank in Taipei, said these developments suggest that HTC is still in a transition stage as it searches for unique content to enhance its competitiveness, but he believes the investment in Magnet may turn out well.

“We think it is normal for investors to question this investment, especially after the recent loss from OnLive and Beats, but we take a more positive view on the new investments, as they are more relevant to the core business,” he wrote in the note. “We think it may be too early to factor in material earnings contributions from the investments, but we believe they could help HTC enhance the competitiveness of its enterprise segments,” said Yang, who rated the stock a “hold.”