New IPhone Plays Stock-killer After Debut

The low price on Apple's new iPhone sank shares of the world's largest maker of Microsoft Windows Mobile-based handsets on Tuesday.

High Tech Computer's (HTC) stock fell 6.9 percent, or NT$57, to end the day at NT$765 (US$25.24) per share in Taiwan. The shares could have fallen further, but the Taiwan Stock Exchange maintains a daily limit for price increases and decreases, and HTC's stock hit the bottom limit by around 10:00 a.m. on the trading day.

A research note from investment banking giant Merrill Lynch said it all. Apple's ability to launch the iPhone globally at such a low price, US$199, will put pressure on HTC, said analyst Tony Tseng. He downgraded HTC stock to "neutral" from "buy" and reduced the target price to NT$850 from NT$940.

Apple's home page highlights the problem for rivals: "Twice as fast, half the price." The new 3G (third generation telephony) iPhone offers faster data transmission through HSPA (High Speed Packet Access), and its price, US$199, or $299 with twice the amount of data storage, makes it one of the least expensive smartphones available with the technology it has on board.

"Most important to users are the lower prices, which we flagged up as a barrier to uptake in the first version," said Steven Hartley, a senior analyst at market researcher Ovum, in a note.

Shares of other mobile phone makers were also hit on Tuesday. E-Ten Information Systems' shares fell 3.2 percent to NT$54.7 in Taiwan, while Compal Communications stock fell 4.1 percent to NT$53.3 on the day. E-Ten shares were supported by the fact PC maker Acer has already announced a plan to buy the smartphone maker. Compal Communications is a contract handset maker, and counts Motorola as a major customer.

In South Korea, shares of Samsung Electronics, the world's second-largest mobile phone vendor, fell 2.9 percent to 666,000 Korean won (US$645.22), while LG Electronics shares tumbled 2.2 percent to 131,500 won.

The reaction on global markets may be overdone. Hartley points out that Apple is still small compared to companies such as Nokia. Apple said it has shipped 6 million iPhones so far, a tiny fraction compared to the total of 1.14 billion handsets sold last year.

There may be plenty of reason for such fear. Apple is competing in more markets at lower prices compared to the original iPhone, said Hartley.

"We feel that this time the potential for disruption is greater than before," Hartley said. "Apple's marketing strength has allowed it to consistently punch above its market share weight. Vendors should not be complacent and must continue to focus on the user experience to regain the marketing initiative from the iPhone, or risk losing even more ground in the high device marketing stakes."