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HTC misses consensus targets on revenue, profit, and annual profit

Times are tough for HTC Corp. (TPE:2498).  Once the darling of the industry, hurtling out of obscurity to become one of the Android industry's "Big Three", the gadget maker has seen its growth stall as Samsung Electronics Comp., Ltd. (KS:005930) began to accelerate in sales.  To make matters worse, the U.S. International Trade Commission just smacked an import ban on some of its older handsets, courtesy of Apple, Inc. (AAPL).  While this may merely mean modifying its Android distribution, it's one more headache HTC doesn't need.  

And that's not to mention the spying allegations against the company following a careless security breach due to sloppy coding within its distribution of "Carrier IQ" user device monitoring code.

Today, the financial figures for HTC's holiday quarter landed [PDF] and they were pretty dismal.

Revenue came in at $101.419B TWD ($3.36B USD) (post-tax), well below the consensus estimate of $113.795B TWD, a miss of 10.9 percent from the consensus analyst target [source].  The revenue almost matched the most pessimistic estimate of $100.532B TWD.

Profits also languished with HTC reporting earnings per share of $13.13 TWD for a total profit of $11.017B TWD ($364.5M USD).  That's 17.2 percent lower than the consensus EPS of $15.86 TWD.

In other words analysts knew HTC was starting to hit the brakes, but it didn't expect growth to drop quite this badly.  

HTC Rezound
Despite power handsets like the HTC Rezound, the Taiwanese smartphone maker saw growth slow faster than analysts predicted. [Image Source: Amazon/HTC]

About the only good news is that HTC still grew for the year, posting a 36.3 percent gain in annual revenue with an unaudited 2011 haul of $62.049B TWD ($2.05B USD), versus $39.534B TWD ($1.31B USD) for the edited fiscal 2010.

Much like the performance of BlackBerry maker Research in Motion, Ltd. (TSE:RIM) back in the 2009-2010 period -- HTC remained profitable, but at the same time saw sales stagnation and drooping profits.  While HTC has yet to show the capacity to sustain the continued high profile embarrassments that have plagued RIM in recent months, investors should file away what happened to RIM for future comparison, to help better determine whether this is just a hiccup for HTC or the start of a true decline like RIM's drop.

An important precaution to note is HTC's stance on publishing unaudited figures versus Generally Accepted Accounting Practices.  The above figures are all unaudited, unless otherwise noted.  Many international firms now publish their results in accordance to the Generally Acceptable Accounting Practice rules from the U.S., but HTC continues to publish unaudited results.  All results are unaudited unless otherwise noted.  For the reviewed and/or audited results HTC did not indicate whether it was following the GAAP or its own accounting standard.  What was clear was that in most cases it audited its earning totals upwards slightly for 2010; so don't expect any big drops.

Looking ahead HTC will likely face a tough 2012.  It has thus far seen no success in the tablet realm.  And some of its best smartphones, like the HTC Rezound -- a phone which packs the industry's best display, a full 3 subpixel 720x1280 unit -- haven't received quite the media blitz that Samsung recent fodder have.  HTC promises more new flagship products next year, but its difficulty appears to be more on the PR/promotional side if anything, at least in the U.S.

HTC was formerly estimated to be the top U.S. smartphone seller, but it's likely now fallen back behind Apple after this poor performance.

Sources: HTC [PDF], Financial Times [analyst estimates]



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RE: Hey Mick...
By Phynaz on 1/6/2012 5:44:57 PM , Rating: -1
They got denied yesterday. When was your Samsung article again?

So like I said. How about a non-biased report on Samsung's shenanigans?


RE: Hey Mick...
By JasonMick (blog) on 1/6/2012 6:48:17 PM , Rating: 2

quote:
They got denied yesterday. When was your Samsung article again?

So like I said. How about a non-biased report on Samsung's shenanigans?

Sure, I'll put it in the earnings report piece I'm gonna do later. Believe it or not I've been covering both sides denials.

Don't get me wrong, I think both companies trying to ban each others' phones on principle is ridiculous and have said that since day one.

That said, I think Samsung versus Apple is at least more of a fair fight in that both companies have big IP libraries. It's kinda like King Kong vs. Godzilla -- at least it's a fair fight.

I have a lot more of a problem with Apple trying to bully a smaller company like HTC who has less IP.

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Granted I think the patent system is relatively broken in that patents can take what is essentially a one sentence invention claim and turn it into say 20 pages. This creates 2 problems:
1. Its harder to determine prior art and novelty.
2. It makes a patent that SHOULD be one sentence seem equivalent to one that SHOULD be several pages due to its actual (not contrived) complexity.

I think ultimately if there's any desire for patent reform, two critical steps are to make the patent office directly taxpayer funded, to help remove the fee-driven incentive to approve bad patents.

I think they need to also impose "NFL-like" rules in terms of if you ever watch a NFL game, if you win both coaches challenges, you get one more. I think the number of patents per company should be limited as a function of their number of employed U.S. citizens, but that if they get patents approved that number gets bumped slightly, but if they get them rejected by submitting bad ones, it doesn't. By capping the # of incoming patents -- particularly from junk patenters, the USPTO would have more time to logically consider prior art. I think the USPTO needs to do a better job making sure that companies are only being granted patents on "first to invent", not "first to produce" as they sometimes are now.

I also think that software patents should be allowed, but only if an independent panel of industry experts can verify that the feature in question is sufficiently novel that it would take more than a certain period of time (say a day) to implement. As with the above suggestion, pose even stricter limits on the amount of SW patents per company, encouraging companies not to waste them on a 15 min implementation of two fingering an element around inside a GUI.

A final idea would be to make a law that above a certain limit (say like $10M USD), a company and its subsidiaries (shell companies) cannot make more income off their IP licensing than off their product in a particular market. That would incentivize struggling firms to either sell their IP and gracefully exit or if they have the financial capacity to actually invest in trying to produce their own product. Any company and its shell companies found in violation would have its patents seized and placed in a public domain sanctuary where anyone can use them for free.

Give bonuses to any PAs who find such violations and can prove they exist via hard facts. Of course to aid this, it would be good to tighten the rules on firms creating hundreds of smaller subsidiaries...

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Anyhow, I will look into your suggestion, but I do think you should consider the possibility that Apple is the aggressor here, based on the fact that it initiated the first litigation between itself and Motorola, HTC, and Samsung. That much seems obvious. In Samsung it just found someone who is equally willing to bully it right back....

(P.S. somehow the end text is appearing bolded due to an error in the engine... apologies...


RE: Hey Mick...
By Phynaz on 1/7/12, Rating: -1
"I want people to see my movies in the best formats possible. For [Paramount] to deny people who have Blu-ray sucks!" -- Movie Director Michael Bay














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