HTC’s financial bright spot last year came in the form of the One A9. However, the device was ultimately not able to make up for the declines that occurred the rest of the year. Ultimately, HTC’s revenue dropped 35% when compared to 2014.
HTC has warned of a projected decline in sales of up to 29% in the current quarter after deciding to focus on mid-tier and high-end smartphones rather than going for volume sales at the lower end. Defending the strategy in an interview in the WSJ, the company’s CFO Chang Chia-lin said that brand image is, in the longer term, more important than sales volumes.
We think that’s the right strategy because we started as a high-end player, and there is still room to go in terms of being a sizable market-share player. The flagship product would create a halo effect, drawing mid-tier and entry-level models along with it. Hopefully, the pie will grow and the mix will be healthy. It’s natural that revenue contribution is associated with brand perception, and that’s something we care about.
Chang argued that while low-cost brands may pick up the volume sales from the bottom end of the market, they risk not being seen as a cool tech brand by more upmarket customers …
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HTC has followed its disappointing Q2 results by issuing revenue and profit warnings for Q3 suggesting the company may make its first ever loss in its 16-year history.
- 3Q revenue is expected to be in the range of NT$50bn to NT$60bn ($1.7 to $2M)
- Gross profit margin is expected to be in the range of 18% to 21%
- Operating margin is expected to be in the range of 0% to -8%
The forecast revenue is below the average of 22 analysts polled by Reuters, and its projected operating margin of between 0 and -8 percent falls below most of the more pessimistic forecasts. Operating margin is essentially net profit margin before taxes, interest payments and dividends. Its operating margin for Q2 was just 1.5 percent.
It’s an ironic position for the company to find itself in not long after launching what we consider to be the best Android handset on the market …
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