HTC faces biggest revenue drop since 2002
Issues results warning for third quarter, as it struggles in the high end market and Europe
Published: 6 August, 2012
HTC continues to struggle in the shadow of Apple and Samsung, and has issued a results warning which is becoming almost routine. With analysts only just collating the smartphone league tables for Q2, the Taiwanese firm said its third quarter revenue would be between TWD70bn ($2.3bn) and TWD80bn, sharply down from TWD135.82bn in the year-ago period.
That means HTC will miss analyst estimates for the fifth quarter in a row, while operating margin will be around 7%, compared with 14.86% in the prior year. The midpoint of its revenue forecast would be 45% down on the year-ago period, its biggest drop since 2002. The company said that it "continues to optimize organizational structure and resources to increase efficiency and competitiveness, focusing on key growth areas". In Q2, HTC had reported net profit of TWD7.4bn, down from TWD17.52bn a year ago, on revenue of TWD91bn.
The delayed shipment of some products to the US, amid legal battles with Apple, was cited as a factor, as well as weakness in Europe, where HTC had made significant progress from 2010. Unlike some rivals, including Apple, HTC is bearing up well in China, where local brands are on the march. HTC said that, in Q2, "Asia regional sales met expectations since the One family launched in Q2" and that in the rest of the year, "with growing brand awareness, strong operator partnerships and increasing retail presence, China is well positioned to become a key growth driver".
However, HTC is pulling back from some other areas. Like others before it, is appears to have been driven out of Korea by the native power of Samsung and LG, and is also reducing its presence in Brazil and closing an R&D center in North Carolina, USA.
"They're going to face a lot of pressure because their high end models are facing a lot of competition," Aaron Jeng, an analyst at Nomura Holdings, told Bloomberg. "HTC's top line sales are declining so they need to cut expenses to help improve their bottom line profit."
HTC's share of the global smartphone market dropped to 4.5% in the first quarter from a peak of 10.7% in the second quarter of 2011. However, IDC rates its performance somewhat better in Q2, at 5.7%.