Tue, Feb 07, 2012 - Page 12 News List

HTC forecasts weak first quarter

ROUGH PATCH:HTC forecast a 36% quarter-on-quarter decline, but said it would be business as usual after the second quarter. Analysts said it was being ‘overoptimistic’

By Jason Tan  /  Staff Reporter

HTC Corp (宏達電), Asia’s second-largest smartphone maker, yesterday forecast a weak first quarter, saying product transitions would bring down its average selling price.

The company said revenue would be between NT$65 billion (US$2.2 billion) and NT$70 billion for the quarter ending next month, translating to as much as a 36 percent decline from the prior three months.

“Some of the products are coming to the end of their lives and this will bring down the average selling prices,” HTC chief financial officer Winston Yung (容覺生) said at an investor teleconference.

He did not offer a shipment forecast, citing market competition.

Gross margins would drop to 25 percent this quarter, from 27.12 percent in the last quarter, and operating margins would decline to 7.5 percent from 12.71 percent, HTC told investors.

“The first quarter will be the trough. It will be back to normal after the second quarter,” Yung said.

Some of the company’s high-end models failed to win over consumers as expected, such as its Long Term Evolution technology smartphone in the US, and that dampened fourth-quarter finances, he said.

HTC faced strong competition in the fourth quarter mainly because Apple Inc’s iPhone 4S debuted to great fanfare and consumers continued to flock to the Galaxy S2 from Samsung Electronics Co.

The Taiwanese maker cut fourth-quarter revenue on Nov. 23 last year by forecasting sales would drop as much as 23 percent from the third quarter to NT$104 billion, reversing a forecast it made the month before that sales would range between NT$125 billion and NT$135 billion.

HTC yesterday said it posted revenue of NT$101.42 billion in the fourth quarter, showing a decline of 25.33 percent quarter-on-quarter and a drop of 2.49 percent year-on-year. Profit was NT$10.94 billion, down 41.4 percent quarter-on-quarter and a drop of 26.04 percent from a year ago.

Analysts in the teleconference questioned whether HTC could meet the first-quarter guidance as there is no major product launch in the pipeline.

“HTC is being overoptimistic that its margin in the second quarter onward can return to the levels of the first three quarters of last year, considering it has conceded that competition in the market is severe,” one analyst said.

Yung said the fourth quarter last year and the current quarter were two periods that have strayed from “normal patterns” amid product transition and that margins would return to “normal” from the second quarter onward.

HTC said it was committed to launching new products with greater innovations, but could not reveal the timeline or product features on market competition.

HTC shares dropped 5.16 percent to close at NT$551 on the Taiwan Stock Exchange yesterday prior to the earnings announcement.

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