Why Wang Xuehong wants to evaporate 100 billion yuan and acquire S3

HTC’s acquisition of a 300 million U.S. dollar company actually reduced its market value by 100 billion yuan. Even more puzzling is the fact that a company that has suffered losses for a decade is why Zhou Yongming has to dominate it. Investors all want to know the calculations and layout of Wang Xuehong and Zhou Yongming.

On July 6th, HTC spent 300 million U.S. dollars (about 8.6 billion New Taiwan dollars) buying VIA S3 Graphics (hereinafter S3), which was a loss-making graphics chip factory in the past 10 years, and shocked the market. The other major shareholder of S3 is WTI, the investment company of Wang Xuehong, chairman of VIA and HTC, and the market's "relationship transaction" and "left-handed sales" have come out loud.

On the next day, HTC’s stock price stopped falling and the market value evaporated instantly. Five hundred million yuan, but the market did not shrink in this regard, the second day HTC stock prices fell more directly under the thousand, the total market value fell two days 1012. Five hundred million yuan. HTC spends a lot of money to buy S3. Investors directly use stock prices to cast a no-confidence vote on Wang Xuehong.

Then, the foreign-capitalization circle has always been known as bearish HTC’s chief analyst Zhang Kaiwei of the downstream hardware manufacturing industry in the Asia-Pacific region of Citigroup. He only reiterated the report three days ago and reiterated the purchase of HTC. On the eighth day, he re-issued a report, directly commenting HTC’s comments. From "Buy" to "Sell," it became the first foreign investment after HTC bought S3.

One question: Why do you have to eat S3?

Many people wonder why HTC has chosen to buy S3 at this time. Zhang Kaiwei also asked in the report: "Why is S3?" People who know more about the details of the transaction case revealed that they were actually fighting against Apple.

Time back in March last year, Apple appealed to the United States International Trade Commission (ITC), complained that HTC's 11 products infringed on Apple's 20 patents; two months later, S3 to ITC delivery, claiming the image of Apple products Software design Apple SDK development kit, infringed S3 four patents.

At that time, industry insiders analyzed that the relationship between HTC and VIA should use S3 to counter Apple. Sure enough, ITC initially ruled on July 1 that Apple did infringe two of S3's patents. Five days later, HTC announced 300 billion U.S. dollars to buy S3 from VIA.

The reason why market criticism has surged like a wave has been, and Wang Xuehong has been operating Weisheng’s poor performance in recent years. The problem of turning investment into excesses and losses is hard to stop. It’s also a question of VIA’s long standing since 2000. Secondly, VIA used two in 2000. ○ After purchasing S3 for 800 million U.S. dollars, it is not imperative to make zero contribution to Weisheng's profit during 11 years. Frequent losses will make it impossible for Weisheng to stand up. Only by the time S3 increases capital in S05, Wang Xuehong’s personal investment company WTI will be introduced. Almost all of the WTI came forward to buy, so that S3 survived so far. After the S3 equity was also increased due to the introduction of WTI, 80% of the equity was transferred from VIA to WTI.

Turning over the VIA Annual Report, it can be learned that the cumulative loss for the ten years of S3 reached 115%. 490 million yuan. For a company that has suffered losses year after year, the majority shareholder is again dominated by Wang Xuehong. It is no wonder that the market will criticize HTC’s buying of S3 as a “relationship transaction” and “leftist selling right hand”. However, people familiar with the details disclosed that the entire transaction case was dominated by talks about mergers and acquisitions, bargaining, and clapping. Both Zhou Yongming and Weisheng General Manager Chen Wenqi negotiated. Zhou Yongming is very clear that he has only one purpose in buying S3. "For patents, he doesn't even care whether S3's business makes or loses."

Second question: Why is the price of 300 million U.S. dollars?

Since the HTC sells the S3 for patents, does the S3 have a patent worth 300 million U.S. dollars? Many market participants questioned that VIA bought the S3 at the cost of less than two years. â—‹ 800 million U.S. dollars, which have lost money for ten years, HTC now spends almost the same amount of money to buy S3.

Although HTC’s insiders disclosed that the price of US$300 million was actually monitored by Finnegan, the world's largest intellectual property rights law firm. At the time, Finnegan’s report to Zhou Yongming was more expensive than US$300 million. It was based on the patent lawsuit between S3 and Apple. Although ITC’s initial judgment had not yet come out, Finnegan’s monitoring price was deemed as S3. The value of the patent exceeds 300 million U.S. dollars.

Industry insiders analyzed that Nortel, which had a patent auction in June this year, was also a lossy company with more than 6,000 patents worth US$4.5 billion. It was used by six big companies such as Apple, Sony and Microsoft. The factory won. "Chen Wenqi can use the public auction method to sell the S3 patent, but this is not so beneficial for HTC who wants to get the S3 patent."

On the other hand, people who are familiar with the details also pointed out that in the past five years, Wang Xuehong had used the personal investment company to eat up the S3 capital increase amount before and after adding up to one. Five billion U.S. dollars, "At the time VIA was unsustainable, it simply couldn't afford to increase S3. Finally, Wang Xuehong had to pay for it."

However, VIA has maintained S3 for 11 years and has not yet produced good results. "Not S3's patents and technology are not good. It is always VIA's pushing products." Insiders observed that if VIA needed S3 graphics chip technology, VIA can sell S3. As a result, VIA is free from S3's patents and technologies, but its products will always lag behind competitors such as nVidia and ATi (later incorporated into AMD).

In the eyes of people in the industry, even if the S3 part of the patent also authorizes Microsoft, Sony, but the proceeds are not much, otherwise S3 will not lose money year after year. Therefore, Wang Xuehong now sells S3 to HTC at a “cost price”. It is even more subject to criticism. “Which people do not lose their businesses? Do you not have to take responsibility for mistakes in your decision?”

If the S3 patent is good enough, it is an important piece for HTC to counter Apple's lawsuit. Why is it necessary to buy the entire company in the way that the patent can be licensed?

Three questions: Why not use patent authorization?

Zhang Kaiwei pointed out in detail in the report that HTC has adopted Qualcomm's Adreno graphics chip and integrated it into Qualcomm's Snapdragon processor. HTC does not need a solution for another graphics chip. The sole purpose of buying S3 is to facilitate follow-up and Apple lawsuits. The S3 patent. In this case, Zhang Kaiwei believes that a large available patent license to replace the purchase of the S3 entire company.

An insider of HTC explained that it was S3 that infringed Apple at the time. If the S3 patent was obtained by way of authorization, HTC could not use the result of this patent litigation. Once S3 became a HTC company, the object to be negotiated by Apple would become HTC will also make HTC and Apple’s lawsuits one more weapon.

After S3 and Apple's infringement lawsuit made a preliminary judgment on ITC on July 1, HTC’s and Apple’s lawsuits will also be initially reviewed on the 15th. HTC’s buying of S3’s counterattack on Apple’s situation is clear, and both parties are bound to launch a new wave of negotiations.

Four questions: Why is the S3 empty?

Despite the fact that the starting point for the entire transaction was based on HTC and Apple’s lawsuit, it is undeniable that after S3 was sold to HTC, S3 had 235 patents allocated to HTC, but S3 Shanghai R & D Center and the mainland Taiwan branch companies still belong to VIA. In particular, the S3 Shanghai R&D center has hundreds of R&D personnel. This is very difficult to convince the public. HTC spends a lot of money not buying shell companies.

More specifically, although VIA sold S3 at a high price, it still has the right to use these patents. Although VIA does not have any competing relationship with HTC, this transaction is unique to VIA, and VIA occupies a reasonable amount of money, which is equivalent to the current use of VIA. With Hyundai, a company with a prosperous industrial status, and holding up its long-lost VIA, the shareholders who invest in HTC, especially the largest shareholding companies, may still have many doubts. No wonder there will be long-term support for HTC. The foreign investment said, "We can do nothing but support with tears."

Two days after the incident, HTC was accused of patent infringement by Canadian semiconductor manufacturer Mosaid. On the eleventh day, Apple even resorted to countermeasures and filed a lawsuit again against ITC to sue HTC for infringement. Both sides attacked and defended the war ahead of schedule. "HTC is already the world's fourth-largest smart phone brand. In the future, this kind of thing will only be more and less, so Zhou Yongming must think about it in the long term and it is a good strategy for HTC." Insiders say that whether Apple sue Samsung , or HTC telegram to Apple, smart phones, tablet PCs this battlefield situation does not change, HTC will repeatedly become opponents of the target.

Before the lawsuit against Apple's infringement had yet to reach fruition, HTC must have been rigorous, but before that, Zhang Kaiwei believed that HTC had a more stunned opponent, which was South Korea's Samsung.

With mature mobile phones, the penetration rate of smart phones has risen. Emerging markets have not been popularized because of the 3G infrastructure. They are now being tested for the growth momentum of smart phones, and Samsung is determined to take the lead on the Android platform. HTC Before challenging Apple, you have to go through Samsung.

In any case, the past year was the most brilliant year for HTC. However, Apple's infringement lawsuit, S3 buy expensive questions, coupled with the slowdown in the growth momentum of smart phones, all seem to have predicted that the global smart phone market in the second half of this year will be rain. HTC, which is a big fan of trees, is surely a big thorn in the eyes of many big manufacturers. The future of HTC will be filled with more and more challenges.