HTC expects revenue to shrink further

Taiwan smartphone maker forecasts sixth consecutive fall in quarterly sales that are below market target as it loses out to mainland rivals

PUBLISHED : Monday, 04 February, 2013, 3:44pm
UPDATED : Tuesday, 05 February, 2013, 5:14am

HTC has forecast its sixth consecutive decline in quarterly sales as the Taiwanese smartphone maker faces a loss of market share to mainland rivals.

First-quarter revenue would be NT$50 billion (HK$13.1 billion) to NT$60 billion, the company said yesterday. The figure was below the NT$64.8 billion average of 19 analyst estimates.

HTC dropped out of the global top five by smartphone market share in the past quarter as Samsung Electronics, Huawei Technologies and ZTE gained share. A new smartphone, codenamed M7, to be unveiled this month may help boost sales and shipments next quarter.

"The M7 could enter mass production in late February, with shipments ramping up from 1 million in [the first quarter] to 2.5 million in [the second]," said Birdy Lu, of Daiwa Securities, in a report last Friday.

Sales might rise as much as 20 per cent in the second quarter from the current period, Lu said.

Net income fell 91 per cent in the past quarter to NT$1 billion, the lowest in eight years, the company reported last month. Revenue of NT$60 billion and operating profit of NT$600 million were equal to its own guidance given in October.

HTC shares closed 1.6 per cent lower at NT$285.50 before the earnings were announced, taking their decline to 5 per cent this year following a 40 per cent drop last year.

Gross margin will be from 21 to 23 per cent, lagging the 24 per cent average of 17 analyst estimates. Operating margin will be 0.5 to 1 per cent.

Gross margin was 23 per cent in the fourth quarter and operating margin was 1 per cent, it said.

Net income is expected to be NT$2.56 billion in the first quarter, according to the average of 17 analyst estimates. HTC did not provide net income guidance.

HTC, whose global smartphone share climbed to 10.7 per cent in the second quarter of 2011, posted a 25 per cent drop in shipments last year, according to IDC. Its declining share put it outside the top five, with less than 4.3 per cent in the fourth quarter, the researcher said last month.

Samsung, Huawei, Sony and ZTE all gained share for the period, it said. Huawei, with 90 per cent shipment growth, climbed to become the world's third-largest vendor in the third quarter.

"We're most confident now because last year we achieved a lot and we changed a lot," chief executive Peter Chou told employees last Friday, after showing off the M7 handset.

HTC named a new marketing chief in November following the appointment of Chang Chia-lin as chief financial officer in April.

In an internal e-mail, Chou told employees in August to "kill bureaucracy".

A global patent battle with Apple was settled during the fourth quarter after HTC agreed to pay royalty to the iPhone maker. Terms of the deal were not disclosed.