Shares in Taiwanese smartphone maker HTC Corp. (2498.TW) have struggled this year but Bernstein reckons there is one dramatic way it could revive its fortunes – cut half its staff.
It may sound like a tough prescription for a company that has seen its shares drop 15% this year but it makes sense given the level of staffing at some of its major competitors. Bernstein explains how HTC’s smartphone business could break-even:
HTC should cut half of its employees. HTC had 10,929 employees at the end of 2016. In comparison, Sony Mobile only has 4,000, and Motorola had 3,500 when it was sold to Lenovo. Both Sony and Motorola have more smartphone shipment than HTC, so there is no reason why HTC cannot cut half of its employees and remain fully functional. Notably, Sony Mobile cut its headcount from 7,100 to 4,000 and turned the business in the black. HTC’s personnel expense is half of its opex. By cutting half of its employees, its opex can be reduced by one-third, which would be sufficient to bring the smartphone business to close to breakeven level.
HTC could also choose to sell the smartphone business, and the buyer would have the lever to pull. If the buyer is another smartphone OEM, the increased scale would further reduce the opex drag; if the buyer is Google or another system house, they would not be burdened by a major loss.
The mention of Google comes amid reports the search giant is set to buy the smartphone maker. Here’s CNBC with more details :
A report from a Taiwanese news outlet called Commercial Times says Google is in the final stages of acquiring all or part of smartphone maker HTC.
The news follows a separate story from late August that suggested Taiwan-based HTC was interested in some sort of sale.
HTC, once one of the more popular smartphone makers in the United States, has fallen off of most carrier store shelves after several consecutive unsuccessful smartphone launches. It recently launched a separate division that sells virtual reality headsets.
Bernstein rates the stock outperform with a price target of TWD80 a share. HTC shares were last trading at TWD66.90.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.