Smartphone maker HTC warns of 30pc profit slide
Taiwan’s HTC Corporation said third-quarter revenue could fall as much as 30 per cent from the previous three months, far worse than expected and underscoring deepening troubles for a smartphone maker with little prospect of an immediate turnaround.
A delayed launch for its much-hyped flagship phone, the HTC One, has only exacerbated inventory troubles and highlighted its lack of scale when compared to Samsung Electronics and Apple at a time when the market for high-end phones is said to be approaching saturation.
HTC said it expects revenue this quarter of NT$50-60 billion (US$1.7-2 billion), far below a market consensus of NT$75.65 billion and its previous quarterly revenue of NT$70.7 billion.
While the company said it expected an improvement in the fourth quarter, analysts were sceptical about a significant near-term reversal of fortunes.
“Negative across the board,” said Daniel Chang, an analyst at Macquarie Securities. “It doesn’t seem like the company has any strategy that can turn this around.”
HTC shares have fallen 44 per cent for the year to date and are now trading at lows not seen since 2005.
It is not the only smartphone maker facing an uphill battle as growth for higher-end phones slows, with Nokia Oyj and BlackBerry also recently reporting weak results.
HTC’s earnings warning is only one disappointment of many over the last several quarters. While the HTC One’s sleek aluminium design has won plaudits, its launch was delayed by several months due to a shortage of camera components and the company has also been hurt by a wave of executive departures.
Its second-quarter net profit came in at just NT$1.25 billion, far below forecasts and followed a record low in the first three months of the year. Its worldwide market share has tumbled to 2.5 per cent, compared with a peak of 10.3 per cent in the third quarter of 2011, according to research firm Gartner.
Alvin Kwock, an analyst at JPMorgan, said HTC’s small size meant it was unable to compete as Samsung cut prices for its Galaxy smartphones in many markets.
“Even a hero product can’t save them,” he said, adding that a partnership with another firm – a possibility CEO Peter Chou has said he would look at – was one of the few strong options open to HTC.
Although HTC is expected to soon launch the HTC One Mini, Samsung and Apple are also likely to announce their own new offerings later this year. A planned marketing blitz, which includes enlisting Robert Downey Jr. for a reported US$12 million to star in its ad campaigns, is expected to weigh on profit margins.