Sat, Oct 05, 2013 page13

• HTC records losses of US$101 million

  EARLY WARNING: Losses are three times what was forecast, alerting HTC that it must transform to survive in a saturated market, analysts said

  • By Helen Ku / Staff reporter
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  Smartphone vendor HTC Corp (宏達電) yesterday posted its first quarterly loss since the fourth quarter of 1999 of NT$2.97 billion (US$101.13 million), a much greater loss than the NT$677 million estimated by analysts.

  The figure reflected a reversion from net profits of NT$1.25 billion in the previous quarter, and net profits of NT$3.9 billion during the same period last year, according to data collected by the Taiwan Stock Exchange.

  “HTC is ramping up production of its mid-end and entry-level smartphone products, but the pace remains too slow for the company to expand its market share in emerging markets in the near term,” Horizon Securities Co (宏遠證券) analyst Cheng Kai-ming (鄭開明) said by telephone yesterday.

  “HTC either needs to develop more innovative high-end smartphone products in the Western markets, or adopt pricing strategies and sacrifice its gross margin in order to compete against Chinese rivals including Xiaomi Corp (小米), Huawei Technologies Co Ltd (華為) and ZTE Corp (中興),” Cheng said.

  Last quarter, revenues contracted 32.78 percent quarter-on-quarter, or 32.97 percent year-on-year, to NT$47.05 billion last quarter, falling short of its forecast range from NT$50 billion to NT$60 billion.

  During the July to September period, HTC suffered an operating loss of NT$3.5 billion, with a negative operating margin of 7.43 percent, HTC said in the statement. HTC has expected operating margin to fall between 0 and minus-8 percent.

  As the smartphone market is reaching saturation point, lukewarm demand for high-end smartphone models dragged down HTC’s profitability last quarter to a net loss of NT$2.97 billion, or loss per share of NT$3.58, according to the statement.

  Cheng was skeptical about HTC chief executive officer Peter Chou’s (周永明) remark at a teleconference held in July, in which Chou said HTC’s profitability might bottom out last quarter

  before recovering this quarter.

  Cheng said HTC needs to adopt effective product strategies in response to saturating smartphone markets in the US and Europe, as well as intense competition in China’s smartphone market.

  This quarter, despite HTC’s plan to roll out a larger-sized smartphone, dubbed HTC One Max, later this month to boost year-end sales, the launch of new smartphone and tablet products by Samsung Electronics Co, Sony Corp and Apple Inc may dilute market demand and weaken HTC’s sales, Taishin Securities Investment Advisory Co (台新投信) chairman Andy Wu (吳火生) said by telephone yesterday.

  “Based on the company’s sales performance during the first nine months of the year, it is going to be very likely to see HTC post a net loss for this year,” Wu said.

  Asked if HTC is better following Nokia Ojy’s and BlackBerry Ltd’s lead and considering mergers with or acquisitions by other firms, Wu said “that will be a great pity and the worst scenario for HTC to end up at,” suggesting that HTC must soon act before its value shrinks or make efforts to secure its brand image.

  HTC yesterday said it has spent NT$1.03 billion buying back 7.79 million HTC shares on the local stock market, according to a company filing to the Taiwan Stock Exchange. The company plans to cancel those shares, it said.
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