Mon, Aug 10, 2015 - Page 13 News List

Brokerages forecast bigger losses per share for HTC

TRANSITION PAINS:HTC is suffering share losses and despite announcing plans to launch new products for high-end consumers, analysts are not so optimistic

By Lauly Li  /  Staff reporter

Several brokerages forecast a bigger loss per share for HTC Corp (宏達電) this year, even though the company has pleged to implement measures, such as focusing on non-smartphone business, to make a turnaround.

This reflects analysts’ lack of confidence in HTC, after the Taoyuan-based company provided a worse-than-expected financial guidance for this quarter.

HTC on Thursday said it might post a loss of NT$5.51 to NT$5.85 per share this quarter, below the market consensus estimate of NT$1.2 loss per share.

SLUMP

HTC shares slumped by the daily maximum of 10 percent to NT$63 on Friday, the lowest level in more than a decade. They have plunged 55.63 percent since the beginning of the year.

“Indeed, if HTC’s management makes a significant restructuring and refocuses on premium and niche markets, the company could make a comeback in the smartphone business,” JPMorgan Securities Ltd analysts said in a note to clients on Friday.

“However, from what we learned from the firm’s earnings call, management is not demonstrating such a sense of urgency,” JPMorgan analysts led by Narci Chang (張恆) wrote.

The Taiwanese firm had its moments. Its stock price once stood as high as NT$1,300 on April 1, 2011, and HTC made a net profit of NT$61.97 billion (US$1.95 billion), or NT$73.32 per share, that year.

SMARTPHONE DOUBTS

In 2011, the smartphone market had doubts over the outlook of Apple Inc after the death of chief executive officer Steve Jobs and only Xiaomi Inc (小米) had a presence in the low-end market.

Global smartphone shipments grew as much as 62.7 percent annually to 487.7 million units in 2011, but the growth rate has significantly dropped by an estimated 11.3 percent to 1.44 billion units this year due to a rising smartphone penetration rate in some markets, such as China, according to International Data Corp (IDC).

REFOCUS

“With competition heating up in this industry, HTC needs to adjust its smartphone strategy and accelerate its speed in non-smartphone business development to seek earnings outside of the smartphone market,” analysts have said.

In a conference call on Thursday, HTC chief financial officer Chang Chia-lin (張嘉臨) said the company is to reduce the number of entry-level and low-end smartphones and refocus on the premium segment of the smartphone market.

Chang also reiterated the firm’s optimism over its non-smartphone products — a wearable device, Grip, and virtual-reality headset Vive, two products that Chang said were almost the same.

WEARABLE DEVICES

HTC unveiled the two items at the Mobile World Congress in Spain in March, but they are not yet being sold.

“The company plans to launch a developer edition of Vive via e-commerce platforms at the end of this year, but did not offer an estimated launch time for Grip,” Chang said.

“Daiwa Capital Markets Inc believes it is the right move for HTC to focus on its profits rather than volume share in the market, but given the intensified competition in the smartphone industry, it will take time for HTC to return a profit,” Daiwa said last week.

Chang also admires HTC’s ambition to step into the non-smartphone business, but he said potential profits of those products may be insufficient for the turnaround HTC expected.

“In addition, HTC has to go through the transition pain to finance non-smartphone projects with cash flows from the smartphone business, but its finance is deteriorating,” he added.

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