Smartphone maker HTC Corp (宏達電) yesterday forecast its fourth-quarter revenue would fall by 14.5 percent to about NT$60 billion (US$2 billion) from NT$70.2 billion in the third quarter, the lowest in 11 quarters, as the company struggles to maintain profit margins in an intensely competitive market.
The latest sales projection came after the world’s No. 5 smartphone brand’s third-quarter revenue fell by 22.89 percent from NT$91.04 billion in the second quarter, down 48.31 percent from the same period last year, HTC said on Oct. 8.
The projected NT$60 billion in sales is also lower than a forecast made by Fubon Securities Co (富邦證券) analyst Jeff Pu (蒲得宇), who expected HTC’s revenue to be NT$69 billion in the fourth quarter amid stiff competition from Apple Inc’s iPhone 5 and the Galaxy Note 2 from Samsung Electronics Co.
Chief financial officer Chang Chia-lin (張嘉臨) yesterday said sales for this month are likely to be lower because the company’s new products are not expected to hit the market until next month.
He declined to disclose release dates for the products, but said HTC would continue to promote brand awareness in China and collaborate with local partners to enhance its presence there.
“Our HTC Desire V T328w posted good sales performance in China. We hope the new HTC T528t will continue this momentum after its launch,” Chang said during a conference call with analysts.
The Taoyuan-based company said the launch of the HTC J series in Japan had been a success.
“We are satisfied with sales of the HTC J series in Japan and hope the momentum will continue with the introduction of the HTC J Butterfly,” Chang said.
The company, which last month introduced the HTC J smartphone in Taiwan, did not elaborate on when it would launch the HTC J Butterfly in Taiwan and what it would cost.
HTC suffered most in the US and European markets amid fierce competition with Apple and Samsung, prompting net profit to fall by 79.14 percent on a yearly basis to NT$3.9 billion last quarter, with earnings per share of NT$4.7, the lowest since the third quarter of 2005.
While the company said its sales performance in the US was in line with expectations, HTC acknowledged that it still needs to increase its brand awareness in both developed and emerging countries in Europe, the Middle East and Africa.
“What we need to focus on now is the European market. We understand the importance of brand recognition. Therefore, we will not cut our marketing budget for the fourth quarter and will continue to build distribution channels in South Asia to intensify our local presence,” Chang said.
The higher costs for both marketing and retailing efforts will place further pressure on the company’s margins.
Chang said HTC now forecasts that its gross margin will be 23 percent in the fourth quarter, down from 25 percent in Q3, while operating margin will fall to around 1 percent from 7 percent in the third quarter.
The projected operating margin of 1 percent represents the lowest level in a decade and much lower than Fubon’s forecast of 6.8 percent.
Shares in HTC fell 4.84 percent to close at NT$236 before the company started its conference call.