Microsoft handset developer to buy phone vendor

High Tech Computer Corp. (HTC), the world's largest maker of mobile phones that use Microsoft Corp. software, will buy a controlling share in one of its customers, phone vendor Dopod (Cayman) Holding Corp., HTC announced Sunday.

The deal marks a shift in strategy for HTC, which until now has said it had no plans to sell phones under its own brand name. It has only made them under contract for companies such as Dopod. The controlling stake in Dopod moves HTC closer to having its own brand of phones on the market.

HTC made trouble for itself by originally announcing it intended to spend "no more than US$150 million" to buy over half of the shares in Dopod, which owns several subsidiaries including phone vendor Dopod International Corp.

But investors balked at the high price of the deal, and HTC backtracked by saying it valued Dopod at $150 million in total, therefore a 60 percent stake should cost HTC around $90 million.

Further souring investor views on the deal was a rumor that the chairman of HTC, Cher Wang, owned part of Dopod. An HTC spokeswoman said it wasn't true.

"Our chairman does not own any shares in Dopod," said Maggie Cheng, head of public relations at HTC. She said a final deal for Dopod has not yet been reached, but HTC expects to acquire between 50 percent and 100 percent of the handset maker by the end of this year.

HTC shares were down 7 percent in early stock trading on Monday at NT$968 each (US$30.22).

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