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 acknowledges that it needs more than high-end handsets
While HTC technically ended 2013 in profit, the company says that declining margins are likely to see it end the first quarter of this year with a loss. HTC reported a wafer-thin profit of $10M from revenues of $1.4B, the latter figure 28 percent down year-on year. Its global market share of shipments was just two percent.
Reuters reports that the company plans to make a wider range of more affordable phones – the same strategy used by Samsung. Samsung made most of its money last year from a combination of its chip-manufacturing business and low- to mid-range handsets, and has itself come under pressure from low-cost competitor handsets …
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Samsung is predicting a record $9.4B profit for Q3 in its latest earnings guidance, on estimated revenues of $53.9B. While both figures are estimates rather than confirmed results, Samsung’s earnings guidance is usually pretty much spot-on. If confirmed, this will build on the company’s record numbers in Q2.
HTC, in contrast, reported its first ever loss, as it warned back in July. Its revenue of $1.6B was lower than even its lower-end forecast, and it lost $101M – the company’s first ever loss in its 16-year history.
Bloomberg attributes the wildly differing performances to sales of mid-market handsets in growth markets like India and China.
While HTC has focused a revival on its flagship One handset and $12 million marketing deal with actor Robert Downey Jr., Samsung has expanded its range of mid-priced smartphones such as the Galaxy Golden and S4 Mini to capture sales in China and India …
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Photo: HTC Chairwoman Cher Wang, and Alice Sun’s blog post
A recent rumor that HTC was withdrawing from the smartphone market, and that the company would be offered for sale, have been denied by the company. HTC recently warned of a possible loss in Q3 following disappointing Q2 results.
The rumor was started by a post on the the Chinese microblogging site Weibo by EE Times Chinese analyst Alice Sun, a commentator with a generally good track-record. However, rumors of a denial swiftly followed, and Engadget has now received what appears to be a definitive denial of the sale – though interestingly no specific response is made to the suggestion that HTC is pulling out of smartphones …
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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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