HTC One shipments may fall 40% in Q3: Macquarie

Staff writer, with CNA

Sat, Jul 20, 2013 - Page 13

Shipments of Taiwanese smartphone maker HTC Corp’s (宏達電) flagship phone are expected to fall by as much as 40 percent in the current quarter because of maturing demand in the high-end market, a foreign brokerage said on Thursday.

Macquarie Securities of Australia forecast that HTC One shipments would drop significantly to between 1.8 million and 2.1 million units in the third quarter, from about 3 million to 3.5 million units in the second quarter.

It estimated that shipments of the phone dropped from more than 1.5 million units in May to 1 million units last month, and would further decline to between 600,000 and 700,000 units per month during the July-September period.

“We believe HTC is still undergoing a structural downturn and we expect more downside surprises to come due to severe competition,” Daniel Chang (張博淇), an analyst at Macquarie Capital Securities Ltd’s Taiwan branch, said in a research note.

“Despite the Street resetting its expectations for the second half of 2013, we believe it is underestimating the impact of maturing high-end smartphone demand, which we expect will significantly affect HTC One’s sell-through results,” he said.

Chang estimated that the HTC One accounted for more than 40 percent of HTC’s second-quarter shipments, or more than 60 percent of its sales, because of the phone’s higher price.

However, he forecast that HTC’s sales in the third quarter would fall by 15 to 20 percent, sharply below consensus forecasts of a flat quarter.

HTC, which saw its sales drop 24 percent last month from May, announced on Thursday a downsized version of its flagship phone — the HTC One mini — to capitalize on the affordable phone market.

HTC said the One mini would be available in select markets from next month onward and would be rolled out globally from September, but did not reveal the price.

Chang said the refreshed model would not be enough to save HTC if the original HTC One fails to create more momentum for the company.

“We also think HTC will find it difficult to compete in the mid-low end market due to its current cost structure and lack of distribution channels,” Chang said.

He gave the stock an “underperform” rating and lowered the target price to NT$92 from NT$148, the lowest level so far among the foreign brokerages that track HTC.

Kevin Chang (張凱偉), a Taipei-based analyst at Citigroup Global Markets, said it would be challenging for HTC to post a full-year earnings per share of NT$10 this year in light of its high marketing expenses to compete with rival Samsung Electronics Co and a slowing high-end smartphone market.

In a note to clients on July 5, he maintained a NT$134 target price for HTC, saying that it remains to be seen whether the company’s operating margin would deteriorate as fast as projected.

HTC shares fell by the maximum daily 7 percent limit to close at NT$168.50 in Taipei trading.