October 8, 2012
Smartphone Maker HTC Sees Profit Slump in Q3
Enid Burns for redOrbit.com — Your Universe Online
HTC began the week on a down note when it announced its earnings for the third quarter of this year. For the third quarter of 2012, total revenues reached $2.4 billion. That was shy of the $2.5 billion average that Bloomberg estimated after speaking with eight analysts over the past month.
Third-quarter profits fell by 79 percent year over year, and a 20 percent drop from $3.04 billion reported in Q2 2012, according to a CNET report. While the figures are low, they are within the range that HTC stated in August, when it forecast revenue between $2.4 billion and $2.7 billion. Unaudited operating income for the quarter totaled $167.4 million. Net income before tax was $136.7 million, according to a statement released by HTC. Before the earnings announcement, HTC shares dropped 0.9 percent to a market close of $9.81 on the TWSE.
Sources attribute several factors to the lower earnings from HTC. A strong period for Apple and Samsung, coupled with "white box" or unbranded handsets selling in Japan took dollars away from the Taiwanese handset manufacturer.
The losses are expected to continue into the fourth quarter, according to some analysts.
"HTC is likely facing further share loss in the U.S. and Europe," Bloomberg quoted Kevin Chang, an analyst at Citigroup in Taipei, as saying. "While HTC was doing well in China in third quarter, we believe the dramatic price declines and performance improvements of white box smartphones have dampened HTC's momentum in China."
HTC is currently the fifth largest handset manufacturer. While the company may be going through a rough period with a few quarters of lower than expected revenues, HTC has enjoyed growth since it released its first Android handset, which hit the market in 2008. HTC released the HTC Dream in October 2008. Before the release of the Android handset, HTC was largely unheard of in the U.S. market, and quickly became a household name as the company released new Android handsets to market.
While the company predominately produces handsets for the Android platform, a few models are available for Windows Phone. HTC may see some help from Microsoft with the release of Windows Phone 8 later this month. HTC has two phones, the Windows Phone 8X and Windows Phone 8S will hit the market in time for the Windows Phone 8 software launch.
Though lowered earnings reports may put the company on the defense, HTC continues to release new phones at a steady pace. A few days before the October 8 earnings report, HTC introduced its HTC One X+ phone that promises higher speeds, higher storage capacity and more battery life.
The company recognizes the need to act in order to hold its place in the market. Bloomberg reports that several emails have been sent to HTC staff from Chief Executive Officer Peter Chou over the past few months that recognize a need for quick action.
"HTC needs to 'kill bureaucracy' as 'we have people in meeting and talking all the time but without decision, strategic direction or sense of urgency,' Chou wrote to workers in an August email obtained by Bloomberg News. 'stay firm with the hero innovations,' he wrote. " The Bloomberg article says.