To survive HTC could merge with a Chinese smartphone maker, but is that possible?

August 1, 2013
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HTC One X Logo aa 6 1600Whenever I have written about HTC I have tried to remain upbeat, I like the brand, I like the phones. Even when the company posted quarter after quarter of declining revenue I reminded myself that the company was still making profit, a profit in the millions of dollars. But since HTC is likely to post its first operating loss ever, it is time to think more soberly about the future.

What if the HTC One and the other products that HTC is designing aren’t able to change the companies fortunes. What next? Other than outright bankruptcy and closure, there is the possibility of a merger, or a full blown takeover. But the question is who? Which handset maker would be the best fit to merge with or acquire HTC.

Most analysts are suggesting that a Chinese maker would be the best fit. A couple of weeks ago an analyst from JP Morgan Securities Ltd suggested that HTC should merge with Huawei and this week pundits quoted by the Wall Street Journal are adding Lenovo to the list.

Joining with a Chinese company would give HTC better access to the huge Chinese market. Also Taiwan and China speak the same language making “doing business” much easier. But historically there have been tensions between the two countries and China has stated repeatedly that its goal is to regain control over the island. This would make any such merger almost impossible from a political standpoint.¬†However according to the¬†Taiwanese Investment Commission, a merger between HTC and a Chinese manufacturer would be technically possible as there is no limit to the amount of Chinese capital which can be invested in Taiwanese companies operating in the smartphone sector.

But in reality HTC should look elsewhere for a partner. Possible suitors would be Nokia and Pantech. Nokia is struggling in the smartphone market and there have been repeated calls for Nokia to release an Android based smartphone. By merging somehow with HTC (which incidentally also makes Windows Phone based handsets) the two could make Android and Windows Phone handsets while decreasing manufacturing costs. Pantech is South Korea’s third largest handset maker which has also had previous financial troubles. By linking up with a Korean partner HTC could retry entering the Korean market.

It might be way too soon to be talking about mergers and acquisitions for the struggling smartphone maker, but maybe there should be some quiet (but brilliant) negotiations going on in the background.

Who do you think HTC should talk to?

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