TAIPEI, TAIWAN - Google Inc.'s Nexus One touch-screen phone may help Taiwanese partner HTC Corp. reverse six quarters of profit declines as the companies challenge Apple Inc.'s iPhone, analysts said.

HTC, the sole manufacturer of Nexus One, Wednesday reported a record 31 percent decline in fourth-quarter profit as falling sales of its Microsoft Corp. Windows-based phones contributed to a 13 percent drop in revenue.

Previous Android-based smartphones failed to stem HTC's sales and profit declines in the face of increased competition from the iPhone and handsets from Palm Inc. and Samsung Electronics Inc. Google's introduction Tuesday of Nexus One, which puts it in direct competition with HTC's own branded devices, may help the Taiwanese company boost profit if it helps promote an alternative to Windows and the iPhone.

"Android is going to be the key driver," said Steven Tseng, who rates HTC "buy" as an analyst at RBS ABN Amro in Taipei. "Android offers a pretty strong platform and growth opportunity for them."

Slow acceptance of Google's new platform as well as technical problems prompted Taoyuan, Taiwan-based HTC on July 31 to forecast its first annual sales drop. Revenue in 2009 will fall by as much as 5 percent, the company said at the time, reversing its earlier prediction for 10 percent growth.

HTC Wednesday reported sales dropped 5 percent to NT$144.9 billion (US$4.5 billion) in the 12 months ended Dec. 31 as profit fell 21 percent to NT$22.7 billion. Fourth-quarter net income dropped to NT$5.58 billion from NT$8.1 billion a year earlier.

"This past year, there's been intensified competition in smartphones whereas previously they had the market to themselves," said Laura Chen, who rates the stock "underperform" at Bank of America Corp.'s Merrill Lynch in Taipei. "Even though there's a lot of positive news from new product launches, they still have a lot of competition, so the company needs to deliver better-than-estimated numbers to drive the share price up."

HTC shares climbed 18 percent last year, underperforming a 78 percent climb in Taiwan's benchmark TAIEX index, as new Windows-based phones from Samsung and LG Electronics Inc. challenged the company's dominance of the market. Samsung and Motorola Inc. are among vendors that have added Android models to their lineup, after HTC was the first with such a device.

Nexus One's contribution to HTC's revenue is "not going to be too significant" this quarter, Chief Financial Officer Cheng Hui-ming said in a phone interview Wednesday without elaborating.

"It will help promote the overall experience of the Android platform," Cheng said. The phone will have a profit margin similar to that of HTC's branded devices, he said.

"The million dollar question is: what's Google's intention with Nexus One?" said Lu Chia-lin, who rates HTC "outperform" at Macquarie Securities in Taipei. "It's not to be a handset vendor. This is more like a flagship product to showcase the true potential of Android."

Lu is among nine analysts, of the 27 tracked by Bloomberg, who recommend investors "buy" HTC stock. Ten have a "sell" rating and seven advise "hold."

"If it's a very successful platform, it will build a big ecosystem like what we've seen for iPhone and its App Store, and then the opportunity will be huge for HTC," Lu said.