HTC may back out of S3 buy after legal defeat

S3 was supposed to provide legal cover for HTC, but the value of its patents collapsed after the ITC ruled Apple didn't infringe them.

HTC is feeling a little buyer's remorse.

The Taiwanese smartphone manufacturer said today that it would reconsider its planned acquisition of S3 Graphics, according to Bloomberg.

The value of S3 is debatable after the U.S. International Trade Commission ruled Apple did not violate its patents and terminated the investigation, dealing HTC a critical blow. HTC had intended for S3's patents to provide it with some legal cover in its ongoing court battle with Apple over intellectual property related to features found in touchscreen smartphones.

"We view this as a negative sign for HTC, which will now have less leverage to negotiate a favorable settlement with Apple," said William Power, an analyst at Robert W. Baird & Co.

HTC said it was having discussions with S3's previous investors.

"In light of recent development, HTC will work closely in good faith with Via Technologies and WTI Investment International to conduct holistic re-evaluation of the S3 Graphics acquisition," said a spokesman.

The planned acquisition of S3 was never popular with investors, who were critical of the deal because HTC Chairwoman Cher Wang owned a stake in the business. The stock tumbled immediately after the company announced the deal.

S3 Graphics, a Fremont, Calif.-based graphic chipmaker, filed its complaint against Apple in May of last year, claiming that Apple's Mac desktop and laptop computers, along with the iPhone, iPod Touch, iPad, and some software were infringing on patents it holds.

But with the patents invalidated by the ITC, there's little practical reason for HTC to pursue the acquisition.

HTC's defeat isn't imminent. The company still has patents it acquired from Google, along with several more court dates as the legal battle with Apple rages on. It also awaits an ITC decision on whether HTC infringed on Apple's patents, which is expected on December 6.

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