Jul 30 AT 8:32 AM Nick Sarafolean 15 Comments

Q3 forecast shows profit drop for HTC


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 ChangHTC
This 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
HTC reports 2013 recond-quarter results

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.

Via: Engadget

Source: Reuters

A nerd at heart, Nick is an average person who has a passion for all things electronic. When not spending his time writing about the latest gadgets, Nick enjoys reading, dabbling in photography, and experimenting with anything and everything coffee. Should you wish to know more about him, you can follow him on Twitter @nsarafolean.

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  • surethom

    I really like HTC phone styles but for me the camera is the number one this I look for, so if next years flagship phone has a 8 megapixel Ultrapixel it could well be my next phone, 4 megapixel produces a photo too small for zooming in.

  • SGB101

    I’m starting to get worried for HTC. I remember buying the One X on release day in the UK and thinking to myself, how can they sell this for £100 cheaper than the iphone/s3 prices.

    It looks now they can’t. No company should be operating on such tight margins, it take one set back to destroy the whole set up.

    I don’t know how they get out of this hole, if they up their prices,to match the quality, people will be pissed. If the go the Samsung cheap and cheerful, everyone that’s left will jump ship.

    I think the final ‘nail guy’ may actually be on to something! He will be along soon :o)

  • Dave Kratter

    @nicksar Why bother sourcing the Engadget article if you’re just going to basically rip off their content and move a few words around?

  • roland

    For starters HTC has to update phones more Faster.and not be an exclusive phone to one carrierI think in the long run you’ll be OK

  • redraider133

    I hope Htc can get back on track. Their one line looks awesome but has hit a lot of hurdles. The more options and competition the better.

  • Hom0ncruse

    final nail in the coffin for HTC

  • Galaxy Note 2

    HTC=High Tech Crap. Owned htc’s up until the one X, Fail. And they didn’t change much with the “ONE”. Sincd then I jumped ship to the SAMSUNG galaxy note 2. Best decision ever. Metal body construction huge fail, still no removable battery and no external sd card slot nail in the coffin. Lol htc tried but only people who bought the one were ex iphone users.

    • SGB101

      That’s a bit harsh, but also some truth there.

      As an ex one X, now note 2 owner I see where your coming from.

    • Droid Sam

      I’ve owned HTC phone for 8 years. Never had any issues. Also, people need to get over the removable battery and SD card complaints. I had both features for years and never really had any use for them. 32/64GB of internal storage is more than enough.

  • donger

    HTC FTW!

  • Joel Davis

    The public just needs to wake the hell up. If you look at %90 of reviews & dog fights the One is the top phone. When the S4 was announced their was a media blow up about what an epic fail it was where as HTCs one release was the complete opposite. People outwardly hate touchflow where as Sense 5 has actually been well received. HTC has always had the best build quality I’m the mobile industry hands down. If you look at all that it should be a no brained as to which phone is winning. But Samsung out sells them 3 to one buy advertising the deal out of gimmicky, worthless features like air hover, & the tilt you head to scroll(like a damn seizure patient), or look away to pause. I mean come on people use those about twice and turn it off. Now HTC boom sound is ligit finally a company puts the speaker facing the user & not just any speaker 2 amplfied speakers that again every review has said are the best in the game. & as an owner I can tell you it’s a breath of fresh air it really does sound incredible (& makes speaker phone calls amazing). HTC Zoe very cool useful feature being able to remove people or items that move through a shot works as advertised, being able to choose each face in a picture & choose between 20 different moments in time to make sure everyones eyes are open & smiling work as advertised & again very useful. The ultrapixel camera, I do think 4mp was too low but still if you not trying to zoom in best camera on any phone. HTC takes chances & most turn out to he wins. Even blink feed grows on the majority of people. & this phone just works. No issues none & probably one of the first mobile devices that is. If you go to XDA this I the first device I’ve ever seen on that site that an overwhelming majority are staying stock. Those guys are die hard rooters & Rom flashers but everyone is saying that it so stable and sense 5 is so good there staying or going back to stock because any roms introduce those little quirks the roms always have. But stock has always had them to so it was always a game of what set of little glitches can you live with. But this phone most are saying you can’t improve on perfection & those that have flashed are going back to stock. The phone is solid, all of HTCs phones always have been thier biggest problem is that’s all the due. Phones. & they dry them well but Samsung, Apple, all these other companies make TVs, PCs, & other electronics. So they have multiple income sources. HTC, just phones. So if they have a slow quarter they feel it because that’s their only income. So they either need to hit home runs with every phone or maybe the need to bring that HTC build quality to a line of smart TVs or something. & they really need to devote more money to advertising, not be afraid to toot their own horn. Because if they go under were stuck with plastic, gimmicky, Samsung & there cartoon touchflo fonts & LG which is a little better but not by much.