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April 07, 2014

Second Loss in Three Quarters Hits HTC Hard

Back on October 3, 2013, HTC released its unaudited earnings results for the third quarter of last year. Unfortunately, the numbers confirmed what the company feared. In July, HTC predicted that it would lose money that quarter and sure enough, it was correct.

Unfortunately, a dwindling market share for HTC smartphones had led to the company’s first ever quarterly loss. In addition, HTC also saw a 54 percent decline in its share price last year. The fourth quarter results were a little better however as HTC just barely broke even. On a yearly comparison, fourth quarter 2012 reported $1.98 billion, this compares to $1.41 billion for 2013 and represents about a 28 percent drop year-over-year.

It would seem that the year has not started on a favorable note. Today, HTC reported its second loss in the last three quarters. First quarter results for 2014 show a net loss of $62 million. This is wider than the loss of $56.5 million an average of 13 analysts had estimated, according to Bloomberg. The 2013 first quarter results had HTC with a profit of $2.8 million.

Although chairwoman and HTC co-founder, Cher Wong, took a more proactive role in the company after last year’s third quarter results, the company continues to have its share of headaches. In December 2013, it was involved in a patent war with Nokia.

Unfortunately, Nokia received a favorable ruling from a London judge. Judge Richard Arnold ruled that HTC could not sell its HTC One Mini phone in the U.K. The date set was December 6, 2013, after which HTC would not be able to sell the Mini due to patent infringement.

The year also did not end on a good note. HTC employees were charged with spilling and stealing secret trade information. Now we see that the beginning of the New Year still has sales falling and quarterly revenue dropping. This marks two out of the last three quarters as a loss with the middle quarter only breaking even.

HTC had and still does have high hopes for the One M8 smartphone. This is the successor to last year’s One M7 model. The company hopes that the device's updated software, camera and industrial design will help lure buyers. It is also counting on its strong carrier distribution, especially in North America. HTC hopes it can gain inroads on Samsung’s Galaxy S5, which is its main competitor in the high-end smartphone market.

Image via Shutterstock.

“New products only came out in March and sales appear to be weaker than even HTC expected. We need to wait until May to see whether sales throughput for M8 is as strong as they hope."  This is what Calvin Huang, an analyst at SinoPac Financial Holdings, told Bloomberg.

The new smartphone was introduced just a few weeks back on March 25. The HTC One M8 features a 5-inch high-definition screen, Qualcomm Inc.’s Snapdragon 801 processor and a micro SD slot. According to a statement from HTC, “The company expects to see positive trajectory of its revenue in April from March and forecasts quarter-on-quarter revenue growth in the second quarter. Sales will be driven by demand for its new products, including the M8 and mid-tier Desire 816.”

Following the same sentiment, Birdy Lu, who rates the stock hold at Deutsche Bank AG in Taipei, said, “The important thing to watch will be whether they can sustain sales into the third month after M8’s product release.”

As you can see, HTC has been through a lot in the past 12 months. The question now is whether it can hold on and see if sales of the new One M8 will take off as expected.




Edited by Stefania Viscusi


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