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Update: HTC's S3 Graphics Buy In Question As HTC Revises Down Forecasts

Call this one the converse of “all’s well that ends well”: HTC is now reconsidering its purchase of S3 Graphics after the latter company lost a case against Apple (NSDQ: AAPL) at the ITC this week.

According to a statement supplied to paidContent/mocoNews, HTC says it is reevaluating its $300 million acquisition of S3 Graphics from VIA Technologies in light of the decision by the International Trade Commission to rule in favor of Apple in a patent dispute, although it also notes that S3 will continue to appeal the ruling:

“HTC is disappointed at the outcome of the recent ITC ruling that stated Apple did not infringe S3 Graphics’ patents. S3 Graphics will continue to appeal. HTC has made significant effort in preparing for these complicated legal proceedings, including a complete legal investigation and comprehensive report on patent and price evaluations. HTC had decided to acquire S3 Graphics based on the strong belief that evidences of patent infringement from Apple were clear and ITC ruled in its initial determination that Apple had infringed two patents from S3. In light of recent development, HTC will work closely in good faith with VIA Technologies and WTI Investment International to conduct [a] holistic re-evaluation of the S3 Graphics acquisition.

That case was formally dismissed earlier this week.

That ITC dispute was related to technology in Apple’s Mac products rather than its mobile devices, although many has suspected that HTC’s interest in S3 was to gain leverage over Apple in its ongoing wireless patent disputes, which are being fought not just in the U.S. but Europe as well.

Separately — and possibly not unrelated to HTC’s decision to re-examine a big acquisition — HTC released another statement that noted HTC was revising its Q4 revenues to be flat compared to the same quarter a year ago. It is still pushing the idea of growth in the first half of 2012:

“Due to global macro economic downturn and market competition, the assumptions of 2011 Q4 financial forecast provided earlier are no longer applicable. HTC expects 2011 Q4 revenue to be approximately the same as Q4 last year. Despite 2011 Q4 revenue is not what we expected, HTC has strong confidence in its products and operation. We expect that growth will return in 2012 H1.”

The connection between S3 Graphics’ owner VIA and HTC has never been as simple as two Taiwanese transacting on an asset, and that throws further questions on the acquisition.

As 9to5mac points out, the two are connected to the same group, Formosa Plastics, with the wife of the CEO of VIA is none other than Cher Wang, the current chairperson of HTC.

3 Responses to “Update: HTC's S3 Graphics Buy In Question As HTC Revises Down Forecasts”

  1. Buying a company solely for the purpose of litigation seems a bit odd. HTC has to weigh the cost of buying S3 against the cost of losing litigation to Apple. Since they had placed a value of $300M on S3 based upon the belief that the litigation against Apple was solid and which could force a stalemate with Apple, then they must believe they would have lost to Apple, otherwise, for an amount far in excess of $300M. If I were the ITC ALJ, this proposed acquisition would have been a telling bit of evidence.

    Good luck, HTC!

  2. James Katt


    Christian Zibreg, writing for 9to5 Mac, on the relationship between HTC and VIA Technologies, the current owner of S3 Graphics:Both VIA and HTC share the same owner, Formosa Plastics Group, a Taiwanese conglomerate whose diverse interests include biotechnology, petrochemical processing and production of electronics components. The entity is owned by the Wang family. The wife of VIA Technologies’ CEO is Ms. Cher Wang, chairperson and co-founder of HTC. So an acquisition of S3 by HTC would really just be moving it from one part of the parent company to another.