Taiwanese smartphone maker HTC Corp (宏達電) is facing another challenging quarter in the first three months of this year due to falling demand for its existing products and a lack of new devices, according to an analysis by UBS Securities.
The brokerage forecast that HTC’s first-quarter sales are to decline by 18.6 percent from the previous quarter and by 18.4 percent year-on-year, to reach NT$34.9 billion (US$1.15 billion), much lower than the market expectation of NT$56.4 billion.
UBS also estimated an operating margin of minus-3.5 percent for HTC during the January-to-March period, which would be only slightly better than the minus-3.6 percent in the last quarter and much worse than the 0.1 percent in the first quarter of last year.
That means HTC is forecast to post a net loss of NT$916 million in the current quarter, compared with net profits of NT$310 million in the previous quarter and NT$85 million in the first quarter of last year, said Arthur Hsieh (謝宗文), chief electronics hardware analyst at UBS.
“We think that unless HTC makes a drastic cut in its operating expenses or registers any non-operating income, it will be extremely difficult to reach the market consensus of NT$412 million profit,” he wrote in a research note on Thursday.
“We are maintaining our sell rating on HTC and believe the company could still post an operating loss in 2014, given its lack of scale,” Hsieh said, reducing the stock’s price target to NT$79 from NT$82.
While HTC’s next edition of its flagship phone, the HTC One, is reported to be launched by the end of next month, Hsieh said he doubts that one single model can really turn things around in light of the rapidly saturating high-end smartphone market.
The industry outlook has become more competitive following Lenovo Group Ltd’s (聯想) recent acquisition of Motorola Mobility Holdings Inc from Google Inc, which will create more pressure for all second-tier handset makers, including HTC, he added.
As a result, the analyst forecast that HTC will post losses per share of NT$1.81 this year and earnings per share of NT$0.13 next year, highlighting more risks in the company’s operating margin.
HTC shares closed up 1.93 percent at NT$132 yesterday in Taipei. The company is scheduled to host an earnings conference call with investors on Monday to brief them on its fourth-quarter results and release its sales guidance for the first quarter.