HTC and Motorola fade in Q1 results

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HTC and Motorola fade in Q1 results

Competition from Samsung and costs of legal battles are seen as the main factors weighing on the original Android stars

By CAROLINE GABRIEL

Published: 9 January, 2012

READ MORE: Financial | HTC | Motorola | Android

The new hierarchy among Android handset makers will be clear to see in first quarter results. While Samsung's preliminary figures showed the company consolidating its lead, former Android stars HTC and Motorola Mobility are both set to disappoint.

HTC said on Friday that its unaudited fourth quarter net profit fell by 26% year-on-year, its first quarterly decline in two years. This was partly blamed on the global slowdown and its effect on smartphone demand, but that trend is not hitting Samsung. The Korean firm has good timing - its Galaxy brand has reached the top of the popularity curve just as tighter budgets make consumers more likely to choose the 'safest' option. It also has the breadth of reach, and the economies of scale, to withstand economic slowdown and price flexibly.

But the real problem for HTC is really the competitive landscape rather than the recession - having led the early Android market with its early entry and its resulting close ties to Google and carriers, it has recently failed to follow up its successful rebranding of 2010, and its popular Sense user interface, with a new wave of high impact launches.

HTC said in a statement that its unaudited net profit for the three months fell to NT$11.02bn ($365n) from NT$14.8bn a year earlier. Its fourth quarter revenue fell by 2.5% to NT$101.42bn. Analysts expect HTC's shares to continue to be under pressure until the market sees clearer indications about the firm's 2012 product launches and also the outcome of its patent wars with Apple. The share price has fallen by 46% since January 2011.

Motorola Mobility was the other early Android star, and of course its assumptions will change dramatically assuming its takeover by Google goes through. Even before that, it enjoyed a place in the search giant's inner circle, largely thanks to its close ties to Verizon. But it has failed to repeat its success with that carrier in sufficient other markets to fend off Samsung.

The firm reported preliminary fourth quarter sales figures which trailed analysts' estimates, blaming rising competition and higher legal costs from its own legal fights with Apple and Microsoft. Final figures are expected to see sales little changed year-on-year, at $3.4bn, Motorola Mobility said in a statement. This was way below consensus analyst forecasts of $4bn.

Motorola talked about the higher costs from intellectual property litigation and an "increased competitive environment" in the mobile device sector. It shipped about 10.5m devices during the period, of which more than half were smartphones.