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HTC could be an acquisition target for Lenovo, Huawei and ZTE: Analyst

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It looks like ailing smartphone giant HTC is being eyed by a number of Chinese device makers including Huawei, Lenovo, and ZTE.

Bloomberg cites analyst Sanford C. Bernstein & Co as saying that the three Chinese vendors are looking at taking over HTC with an intent to leverage the $4.2 billion Taiwanese giant's technological know-how and brand prowess in the mobile devices segment.

"They continue to produce the best phones of the industry," said Pierre Ferragu, an analyst at Bernstein in London. "They have good brand recognition. From that perspective, they could be an acquisition target for a company with more scale but less product development expertise and weak brand positioning."

While HTC's critically acclaimed flagship device, the HTC One showcased company's skill at making premium hardware, it faced stiff competition from the likes of Apple, Samsung and other Android OEMs. The launch of the device got delayed due to component shortages affecting the company's net profit.

The company's second-quarter net profit came in at just T$1.25 billion, far below forecasts.

Recently, HTC said it expected revenue to fall as much as 30 percent in the third-quarter of the year compared to the previous three months, citing fierce competition in the mid -to high-end smartphone markets. The company also indicated a weak outlook for profit margins.

Rocked by internal feuding and executive exits, HTC is positioned at the high-end of a smartphone market that is close to saturation. Thus, the company has seen its market share slump to below 5 percent from around 25 percent five years ago and its stock price is at an 8-year low.

While Lenovo is a new entrant in the mobile devices segment, it's riding on the success of its PC business to establish itself in the market, and a big acquisition would certainly help it in consolidating its position. The company recently reported good numbers back on a strong showing in the mobile space. Huawei and ZTE have the scale and produce millions of white labelled devices but their brands are not as well recognised as that of HTC's.

However, Bloomberg suggests that Chairwoman Cher Wang and her family, who hold a stake in HTC, may stand in the way of a takeover as long as the company has adequate cash.

With agency inputs

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