Wed, Oct 07, 2009 - Page 12 News List

HTC reports Q3 drop in earnings amid price drop

DOWNWARDLY MOBILE Sales fell 13.75 percent last month to NT$11.83 billion, and Gartner Taiwan said the firm will be facing more heat from competitors

By Jason Tan  /  STAFF REPORTER

HTC Corp (宏達電), the biggest maker of mobile phones running on Google Inc’s Android and Microsoft Corp’s Windows operating systems, reported a drop in earnings yesterday for the third quarter, amid intense competition and dropping average selling prices of smartphones.

Third-quarter net income dropped 18 percent to NT$5.76 billion (US$179 million) from a year earlier, while total revenues declined 10.17 percent to NT$34 billion, the Taoyuan-based company said in a statement.

Sales last month fell 13.75 percent to NT$11.83 billion from a year ago, while total revenues for the first nine months of this year slipped 1.31 percent to NT$103.79 billion, the statement said.

HTC cut its whole-year sales forecast in late July to a decline of as much as 5 percent this year, from a prediction of 10 percent growth. The reduced outlook was caused by a delay in the introduction of handsets from the second half of the year to next year, lower contract-manufacturing orders and slower-than-expected demand of third-generation handsets from China, the company said.

“HTC has been faring well in the smartphone arena, but it is feeling the heat as the competition intensifies,” Lu Chun-kuan (呂俊寬), a senior research analyst at Gartner Taiwan, said by telephone.

The maker of the market’s first Android handset going head-to-head with Apple Inc’s iPhone, Research in Motion Ltd’s BlackBerry, Palm Inc’s Pre handset and smartphone models from Nokia and others.

Smartphones are poised to be the next growth engine for the mobile phone industry, but more consumers are going for mid-tier smartphones instead of high-end ones, which depresses overall average selling prices, Lu said.

HTC will introduce a number of new smartphones running on the latest Windows Mobile 6.5 in the fourth quarter.

The UK telecom operator O2 will reportedly unveil HTC HD2 on Monday. The phone will reportedly offer the “largest mobile screen yet” — a 4.3-inch touchscreen.

US operator Verizon Wireless launched HTC Imagio yesterday, retailing at US$199.99 for a two-year contract. The Imagio lacks a slide-out QWERTY keyboard but comes with a 3.6-inch touchscreen, Verizon’s Vcast Mobile TV and a 5-megapixel camera.

US wireless carrier AT&T rolled out its first Windows Mobile 6.5 model on Monday — the HTC Pure — priced at US$150 with a two-year contract. The phone was rebranded from the earlier HTC Touch Diamond 2, which comes with a 3.2-inch touchscreen.

Despite its launch of new models, HTC’s fourth-quarter revenue could disappoint investors again, Citigroup analyst Kevin Chang (張凱偉) said in a client note yesterday.

“We believe the company is suffering from relatively low awareness of Android models in Europe and aggressive share gain of the Apple iPhone around the globe,” Chang wrote.

In the long term, Chang said the company could face challenges such as weak unit sales, falling average selling prices and slow but consistent margin erosion.

“We believe HTC needs time to examine its business model, and in a new environment where mass adoption is happening, its firm pricing strategy may need to take a backseat,” he wrote.

HTC shares edged up 0.7 percent yesterday to close at NT$355 in Taipei trading.

ADDITIONAL REPORTING BY KEVIN CHEN

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