Smartphone maker HTC Corp (宏達電) yesterday posted NT$640 million (US$21.02 million) in net profit for last quarter, which beat company and analyst expectations as intensifying competition and widespread weak demand for high-end smartphones were originally expected to depress profitability.
It was the second consecutive profitable quarter for HTC, but 72 percent less than the NT$2.3 billion it made in the previous quarter.
Operating income plunged to NT$160 million during the quarter ending Sept. 30, compared with NT$2.5 billion in the prior quarter.
Overall, HTC reported NT$0.78 in earnings per share, exceeding the firm’s forecast of between NT$0.05 and NT$0.69 per share.
“The [third-quarter] figure is a total surprise. I thought HTC would drift into the red again,” Yuanta Securities and Investment Consulting Co (元大投顧) analyst Jeff Pu (蒲得宇) said by telephone.
However, the unexpectedly positive financial performance is unconvincing enough for Pu to lift his “sell” rating on HTC, as there is still a bumpy road ahead for a turnaround.
“I will not make any changes before it provides a more solid business outlook,” he said.
Pu set HTC’s target price at NT$88, implying a 33 percent downside from the stock’s closing price of NT$131.5 yesterday.
HTC yesterday also posted 15 percent growth in revenue for last month to NT$16.72 billion, from August’s NT$14.54 billion.
In the July-to-September period, HTC’s revenue plummeted about 36 percent sequentially to NT$41.86 billion, from NT$65.1 billion in the previous quarter.
That meant HTC missed its own revenue projection of between NT$42 billion and NT$47 billion for last quarter.
Commenting on HTC’s latest managerial shake-up, Pu said that the company’s decision to appoint the research and development veteran David Chen (陳文俊) as chief operating officer would have a positive impact on the company.
“It is good that every executive can focus on his own job,” Pu said.
Chief executive officer Peter Chou (周永明) is in charge of research and development work, while global sales president Chang Chia-lin (張嘉臨) and Chen will collaborate to develop and market new products, according to HTC.
As part of its turnaround efforts, HTC confirmed that it has resumed its old business of making mobile devices for other companies, or original design manufacturing (ODM).
Google Inc is expected to be the first customer of its ODM business by making the Nexus 9 tablet for the US Internet giant, Pu said.
“HTC is in desperate need of seeking new growth areas,” he said. “But the business will not help boost the company’s profitability as it is a low-margin business.”
“It makes no sense for HTC to do ODM business again as it is increasingly farming out manufacturing as well to save costs,” he added.
As much as 25 percent of HTC’s smartphones shipped next quarter would be made by its manufacturing partners including Compal Electronics Inc (仁寶), up from a single-digit percent at the beginning of this year, Pu said.
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