After showing some signs of hope during Q2 when HTC’s earnings were not so devastating, Q3 has sent the company’s bankbooks plummeting again. With HTC’s current Q3 predictions, it seems that the company still has a long way to go before it can make it back to being profitable. How long? Well, let’s take a look at the numbers.
The predicted revenue for next quarter is between $1.67 billion and $2 billion, which doesn’t sound so bad. That is, until you realize that the profit margin has a spectacular range of $0 to around -8%. That equates to about, well, needless to say it’s a horrific number. Last year’s profit revenue came in at $2.4 billion and the operating profit was $168 million. This year is a definite drop in comparison.
This isn’t to say that HTC’s phones aren’t doing well; they are. Peter Chou tried to underscore the fact that the One is still selling very well; the profit drop is mostly due to a higher cost structure and the fact that HTC is currently trying to clear older hardware out of its inventory. HTC’s CFO even said this about the One:
If you compare the HTC One -- in terms of sell-out, in terms of our internal data -- to the combined hero products we had over the same period last year, it's actually performed better.Chialin ChangHTCThis seems to indicate that the One is selling better than both the One X and the One S combined. That’s an impressive feat.
So what is HTC to do? That remains to be seen, but CFO Chang says that he and his team have plans laid out to bring the company back to profitability. The release of the One Mini should help to continue to boost sales. And with rumors of another entry-level and mid-range phone on the way, HTC should get its products into more people’s hands.
What do you think that HTC should do?Show Press Release
Taipei, Taiwan – July 30, 2013 – HTC Corporation (the Company, TWSE: 2498), a global leader in mobile innovation and design, today announced consolidated results for the Company and its subsidiaries for the second quarter of 2013.
2Q 2013 Results
HTC posted quarterly revenue of NT$70.7 billion, with gross margin of 23.2 % and operating margin of 1.5%. Net profit and EPS were NT$1.25 billion and NT$1.50, respectively.
“My leadership team continues to focus on execution,” said Peter Chou, CEO of HTC. “We are seeing expected results as we fill the channels and meet demand for the new HTC One. As we broaden our focus to include a new member of the HTC One family, the recently announced One mini, we are looking forward to delivering great products and results in 2H.”
HTC announced key appointments, including Jack Yang to president of South Asia, Sirpa Ikola to senior director of marketing for South Asia, and Lorain Wong to vice president of global PR.
As manufacturing ramped up, the US saw sequential growth in 2Q, as well as expansion in retail channels. EMEA saw renewed strength in major Western European markets and emerging countries.
Progress was observed across Asia. HTC gained market share in Taiwan, showing an improved presence in Hong Kong and warm reception of its products by consumers in Japan. In China, sales of HTC’s high-end models improved, while competition at the mid-tier and affordable intensified. In South Asia, the improvement of key operator relationships provides optimism about the region.
3Q 2013 Outlook
The Company’s outlook for the second quarter of 2013 is as follows:
3Q revenue is expected to be in the range of NT$50bn to NT$60bn
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 new HTC One has performed well in the market, better than that of our hero products for the same period last year. We aim to extend the momentum as we enter into the second half of 2013. The new HTC One has also helped the company establish strong brand awareness and received numerous accolades as the world’s best smart phone. With the help of HTC One, we have regained superphone market share across major markets including China.
We also have plans underway to launch a range of innovative and competitive mid-tier products in the coming months. We hope to regain momentum and market share in these segments in Q4. This will address our challenge of mid-tier products competiveness
Our overall gross margin has been impacted by the relatively higher cost structure, lack of economy of scale and certain provisions needed to facilitate the clearance of aging products in the channel. Actions have been taken and we expect to see improvement in Q4
We are also optimizing our organization, including the improvement of management efficiency and effectiveness.
People, innovations, and technology are the core assets of HTC. We will continue to invest in innovations and technology, as well as retaining and rewarding our best talents. We look forward to a brighter future for HTC and continue to delight our customers with the best and most exciting products.