Q3 2007 HIGH TECH COMPUTER CORP Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Welcome to the HTC Q3 2007 Results Conference Call, and the webcast hosted by Hui Ming Cheng. I'd like to inform all parties that you will be in a listen-only until the question-and-answer session of today's conference.

I'd like to turn the call over to your host today, H.M. Cheng. You may begin.

HUI MING CHENG, CFO, HIGH TECH COMPUTER CORP.: Okay. Thank you. Thank you for your participation in the HTC's third quarter business review. Let me begin with the disclaimer statement. The statement and the business forecast, as well as the business outlook in the following discussion, is based on, a certain assumption and our better judgment. Further, because the uncertainty of the futures, we will not be responsible for the realization of those numbers or outlook of where we had just discussed. Let me begin with the slide executive summary. We had a good third quarter result. The revenue and the net profit after tax, both numbers had a slightly above the second guidance that we've given in the last business review conference.

The outlook of the fourth quarter of this year is promising. We are looking at around 20% revenue growth, and this is primarily because of 40% growth rate in the non ODM business. Within this non ODM business, the growth rate is good, delivery from our success [exclusion], from our business model transitioned from the ODM business to the non ODM business. The industry in the last 12 months has been undergoing a lot of changes and HTC has been taking initiatives to respond to the changes. The delivery and the success launch of the HTC Touch is good evidence of -- we had taken the necessary steps to respond to both the opportunity and the challenge presented by the industry migration in the coming futures. And we think we are in a better position to meet the challenges and to enjoy the opportunity presented by the industry growth.

Let me turn to the next page, as to the industry -- some of the observation we had with regard to the converging designs industry. We think the ecosystem of the converging device is gradually in shape and this is evidenced by a few factors. One is the installment of the 3G transmission platform by the major operators, largely in place. And we are seeing a stronger demand from those major operators interested to buying the 3G device. But, rather they consider the converging device is a good and able device for them to accrue the higher ARPUs in the [datas] and present a brighter growth potential for their revenue growth. The second trend is the enhancement of the technology in the last few years, as making the possibility to design the converging device in a much compact [phone factors]. This will require a power management, which will reduce the battery as well as the transmission speed, as well as the radiation capability. Again, HTC Touch especially in our 3.5G, the Touch Dual designed in lines of the 3.5G, we are still being able to manage and to make it a device as it weighs over of 120 grams and also in a very compact form.

By having this [upon] factors, it was making the possibility for a converging device penetrated into the consumer market. The third reason is one over [inaudible] for a converging device in the past for the consumers who adopt is the learning curve that we require to familiar with the using the interface. The arrival of the HTC TouchFlo and also the Touch from the iPhone is creating a lot of interest from consumer areas, thus beginning to gain the interest to pay the efforts, to learn the converging device and to enjoy the benefits from this converging device. The entry of Apple and potentially from other vendors who came from a non traditional handset vendors, also throw another opportunity and a challenge in this converging device industry. The reason we say this is because they are not coming from an angle of traditional handset, for they would bring a new application potential as well as a new concept to utilize the converging device, also, which would trigger a faster growth potential for the converging device, and also the interest from the consumer market.

In summary, we think the converging device is gradually changing from a current complimentary mobile device into a primary mobile device in the niche market and this niche market is likely to grow faster and bigger in the coming few years.

Please, turn to the next slide. In this slide, what I am trying to deliver is what HTC management has tried to do in the past 12 months in response to two quarter we have seen as to the transition or migration of the converging device industry. On the technology platform we had successfully to transform our technology platform from the 2.5G to 3G or 3.5G, both in the WCDMA as well as the CDMA areas. If we look on the product offering from HTC in the fourth quarter, you may observe there is only device which is EDGE based, for the rest is all either the CDMA, 3G or the HSDPA based. Looking ahead, our product offering in the next one year is likely to be 3G and 3.5G dominant, with the 2.5G EDGE as complimentary device for lower ASP in either the developed market or for the market -- in …