The Taiwanese cell phone maker, HTC’s profits fell to less than half in the 2nd quarter owing to the sad state of sales in Europe as well as the hold-up of the phones in the customs of the US. This announcement of the dip in profits happened on the same day as Samsung declared its record 2nd quarter earnings aided by remarkable sale of the Galaxy series.
Although HTC’s sales grew fourfold since 2010, it now has a huge challenge in front of it to regain its stronghold in the market from Samsung and Apple. It is banking on its new “One” series for this and according to its chief executive, Peter Chou; HTC will launch other new models later this year.
However, analysts feel that HTC will be adversely affected by the sales of the Galaxy S III and the much awaited iPhone 5. KGI Securities Analyst, Richard Ko, feels that HTC’s uncompetitive pricing may not let them gain market in China. He also feels that their lower scale and margin, in comparison to Apple and Samsung, may increase short and medium term pressure on sales.
Nomura Securities Analyst, Peter Lao said that a traditional high sale may not be seen this year in the 3rd quarter and that companies are not seeing strong pull-in and operators are feeling conservative towards giving subsidies.
HTC has also not renewed the contracts of some production line workers hired during the high season. Not more than 1,000 people have been affected though.
HTC quoted that its unaudited April-June net profit was T$7.4 billion ($247.7 million), down from T$17.52 billion in the same period last year, but improving from T$4.47 billion in the January-March quarter. According to a Thomas Reuters survey, earnings had been expected to drop to T$8.25 billion. 2nd-quarter revenue was T$91 billion, up from T$67.79 billion in the previous quarter. HTC also cut its 2nd-quarter target revenue by more than 13 % last month, to T$91 billion and its operating margin forecast by 2% points to 9%. But its gross margin target was kept at 27%. They also said in a separate statement that consolidated sales for June were T$30 billion, down 33.4& from June last year and remained the same from May this year.
HTC shares closed at T$322(down 5.15%) before the earnings were released, while the entire market fell by 0.26%. The company has a market value of around $11.4 billion.
