Patent Dispute Holds Up Sales of HTC Phones in U.S.

U.S. sales of two new smartphones from HTC will be delayed because of a patent dispute with Apple, a fresh blow to HTC, of Taiwan, as it seeks to turn around declining sales in what was once its largest market.

Shares in HTC tumbled more than 6 percent Wednesday after it said shipments of the phones were being held up by U.S. customs officials.

Apple won a narrow victory against HTC in a patent lawsuit in December over the technology used in the devices, one of many such disputes in the fiercely competitive smartphone market.

In a statement Wednesday, HTC said, “The U.S. availability of the HTC One X and HTC Evo 4G LTE has been delayed due to a standard U.S. Customs review of shipments that is required” after an International Trade Commission exclusion order.

The two models in question are the first devices to be delayed since the commission’s ruling, which said that HTC phones with the disputed technology would be barred from entering the United States beginning in April. HTC has said it has changed its new phones to avoid the technology but that the shipments still require inspection.

“It’s really hard to tell how much longer the phones will be held up at the customs, because the review has already taken a month,” said Bonnie Chang, an analyst at Yuanta Securities.

HTC, formerly a contract manufacturer, had a fairy-tale ride in 2010 and early 2011, when its shares more than tripled in the 14 months to April 2011. The company’s sales grew fourfold in 18 months, as consumers snapped up its innovative phones, with distinctive features like large clock numerals.

But the company suffered an equally rapid fall from grace, as its phones failed to keep up with the Apple iPhones and the Samsung Galaxy line.

Some shipments of the new One X model had reached the United States before the ban date, enabling its introduction, but further shipments are being held up, an HTC official in Taipei said.

The U.S. telecommunications company AT&T, which has carried the One X model since May 6, said the smartphone was “out of stock” on its Web site.

The introduction of the Evo 4G LTE by Sprint, originally scheduled for Friday, will be delayed. Sprint has been taking pre-orders on its Web site.

In its statement, HTC said it believed it was “in compliance with the ruling and HTC is working closely with customs to secure approval.” Sprint and AT&T both declined to comment.

HTC said it was keeping its second quarter revenue guidance unchanged at 105 billion Taiwan dollars, or $3.5 billion. Shares in the company closed down more than 6 percent in Taipei on Wednesday, with the broader market down 2.2 percent.

Some analysts expressed concern at the implications of the longer-than-expected review process by U.S. Customs and Border Protection.

Last month, Peter Chou, HTC’s chief executive, said the company would not return to the days when more than half of its revenue came from the United States, a market where it saw a big drop in business last year because of the fierce competition from the iPhone 4S.

In late February, HTC unveiled its One models, which are aimed at fighting back against Apple and Samsung. The new phones offer faster graphic chips and advanced music and photography functions. They have received generally positive reviews from analysts and technology bloggers.

Analysts at Goldman Sachs said Wednesday that the U.S. market was expected to account for 15 percent to 20 percent of HTC’s second-quarter shipments, adding the customs delay might hit the company’s earnings this quarter and possibly in the third quarter, depending on how quickly HTC could resolve the issue.

Ms. Chang of Yuanta said that although some HTC One X stocks were available for sale because they had already cleared customs, the quantity was unknown. Third-quarter sales could be affected if there were not enough to meet demand, she said.

Second-quarter revenue would be unaffected, she added, if the customs review were to be completed within a week or two, as HTC had already booked the revenue from these shipments as they left Taiwan.