HTC profit Plunges, sales of "One" slow as sector stagnates

HTC logoOnce the top smartphone seller in the U.S., Taiwan's HTC has today slipped to tenth place, according to Gartner. The company this week announced its earnings for June, revealing that it will miss analyst earning expectations despite modest sales of its well-reviewed flagship "One" smartphone. The struggles are the latest for the company, which has seen a dramatic financial fall from grace since late 2012.

The Fall to Tenth Place

The embarassing plunge could be blamed on a variety of causes: Poor management

  • The general competiveness of the smarpthone market
  • HTC's failure to gain ground in emerging markets like China
  • U.S. slippage (due to import bans and being outmarketed by top U.S. sellers Apple and Samsung
  • Margin-chopping license fees to Apple and Microsoft

HTC gave no hard numbers on how many One smartphones it has sold, only stating that sales are picking up. Previously, an unnamed executive had told The Wall Street Journal that by late May 5m One smartphones had been sold. That was roughly 2 months after the global launch, and 1 month after the U.S. launch (which was delayed to late April).

But Citigroup Inc. (C) Global Markets Inc analyst Kevin Chang estimates there may only have been ~1.2m in May sales and ~600,000 in April sales. He commented to The Taipei Times, "HTC shipments to peak in May, stay at a similar level in June and start to decline in July."

HTC One

And reality may be even worse than that when it comes to June sales. HTC pocketed $29B TWD ($962M USD) in May, but just $22.1B TWD ($733M USD) in June. June's sales had erased roughly 70 percent of May's gains over April, at about twice February's record low ($11B TWD ($365M USD)).

In total HTC took in $70.7B TWD ($2.35B USD) for the quarter versus a Bloomberg analyst consensus of $72.8T TWD ($2.42B USD). Net revenue (profit) was $1.25B TWD ($41.5M USD), well short of the $2.17B TWD ($72.0M USD) Bloomberg-surveyed analysts predicted.

The losses come despite aggressive cost cutting by HTC and facility closures late last year.

No Relief in Sight?

The future is murky for HTC.

It's making aggressive changes on the marketing and management fronts. It reportedly signed Robert Downey Jr. (of Iron Man fame) to a $12M USD endorsement deal, making him the face of HTC's high-tech smartphones.

Those high-end products include such well reviewed premium products as the overseas "Butterfly" model and the international "One" flagship device, both of which feature attractive margins.

But overall HTC's lineup looks anemic and its recovery seems to be slowing. There's a serious risk that HTC's long time CEO Peter Chou may step down. Poor support for last year's mid-range devices is a troubling sign for HTC, and may be enough to scare off customers to HTC network-carried handsets.

Those things aside, perhaps the biggest looming threat is the lack of upcoming products in the pipeline, at least according to currently leaked information. HTC is planning on launching an HTC One Mini in August that looks like a substantial step up from the Galaxy S 4 Mini. But the Galaxy S 4 Mini is out now -- and Samsung's rumored to upgrade it around the time of the HTC One Mini launch.

Samsung is releasing specialist smartphones (like the GSIV Active and GSIV Zoom), while HTC's lineup remains small. And while Apple's big update -- the Apple iPhone 5S -- and a faster Galaxy S IV are rumored to be on the horizon for fall launches, there's a relative lack of compelling upcoming product from HTC in the rumor mill thus far. That's not to mention Huawei upcoming Ascend P6 and Nokia Lumia 1020.

Sure, the HTC One impressed, but did HTC tip its hand too early and fail to follow up? That's what increasingly looks to be the case, as the next generation of smartphones to be released over the next few months aim to erase the reviews lead HTC's flagship device briefly enjoyed.

HTC can take comfort in the struggles of Apple and Samsung. But at the end of the day the parts of the roadmap that are leaked or public known seem to suggest HTC to be at a competitive disadvantage looking at the rest of 2013.

Source: DailyTech

Tags: HTC, report

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