HTC Corp (宏達電), the world’s No. 5 smartphone brand, yesterday reported a nearly 70 percent annual decline in first-quarter net profits to NT$4.46 billion (US$156.39 million), or NT$5.35 per share, on shrinking demand.
The Taoyuan-based company’s operating margin — which indicates how much profit a firm makes after paying for variable costs of production — also marked the lowest first-quarter level in the firm’s history at 7.52 percent, according to the company’s financial statement.
Consolidated sales in the first quarter stood at NT$67.79 billion, down 34.92 percent from a year earlier and 34.82 percent from a month earlier.
The company’s consolidated revenues last month amounted to NT$30.88 billion, down 16.62 percent from a year ago, but up 52.19 percent from a month earlier.
HTC’s first-quarter sales were in line with the company’s early forecast of between NT$65 billion and NT$70 billion, but slightly behind consensus estimates of NT$71 billion, UBS Securities analyst Arthur Hsieh (謝宗文) said in a research report.
However, the month-on-month increase in revenues reflected strong shipments of HTC’s newly released One-series smartphone, Hsieh said.
The foreign brokerage house expects HTC’s revenues and profits to ramp up in the second quarter partly due to lack of competition.
However, the company will face more uncertainties in the third quarter, Hsieh said.
“It could see a threat from other competitive models, such as Samsung Electronics Co’s Galaxy S3 or Apple Inc’s iPhone5, which might be launched late in the second quarter and [would be] ready for sale in the third quarter,” Hsieh said.
In addition, a further delay of the introduction of a customized Facebook phone is expected to be another major downside for HTC, he added.
The brokerage house lowered its forecast for HTC’s full-year net profits to NT$51.67 per share, down from its previous estimate of earnings per share of NT$61.47, on its lower forecast device unit shipments.
The brokerage also lowered its price target for HTC to NT$570 from NT$650. The company’s share price rose 2.81 percent to close at NT$585 on the local bourse yesterday before the earnings announcement, compared with the TAIEX’s 0.87 percent increase.
HTC North Asia-Pacific region president Jack Tong (董俊良) said last month that he expects its One X model — the company’s flagship smartphone scheduled to go on sale worldwide by the end of the month — will help its revenues rebound beginning in the second quarter.
The company also plans to expand its retail stores in China to between 3,000 and 4,000, from the current 2,000, by the end of this year in view of strong demand for its smartphones in the Chinese market, Tong added.