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Troubled investments and troubled sales equate to a troubled HTC

Taiwan's HTC Corp. (TPE:2498) is in trouble.  Struggling in global sales and a $40M USD hit from its failed OnLive cloud gaming investment, the Taiwanese OEM posted dreary financials for Q3 2012.

Revenue came in at T$70.2B ($2.40B USD), while profit came in at T$3.9B ($133.1M USD).  While over one hundred million in profit would be good news for many firms, you only need to glance at HTC's results to see the disturbing trend that has unfolded over the past several quarters:

HTC

HTC did have some success on the quarter.  It launched the HTC One X+, a beefed up version of its Android flagship device.  It also announced the 8S and 8X Windows Phone 8 smartphones, which it claims Microsoft Corp. (MSFT) considers the "hero product" of the Windows Phone platform.

Also in the good news category HTC reduced its excess inventory.  And it made a bold $35M USD investment in Magnet Systems, a U.S. firm which HTC describes as "the creator of next-generation software platform for [the] mobile enterprise market."

But in the bad news category, HTC's gross margin -- a measure of return on sales -- has slid from 28 percent to 25 percent in the last year.  And HTC's slumping earnings have forced it to cut R&D spending by 15 percent, cut advertising/marketing by nearly 45 percent, and cut administrative overhead by 30 percent.

HTC quietly brilliant
Struggling phonemaker HTC will be a lot more "quietly" brilliant: it's cutting its marketing spending by approximately 40 percent. [Image Source: Reuters]

Such cuts can be a double-edged sword.  On the one hand they may help HTC's financials in the short term.  On the other hand, cutting your marketing budget nearly in half and making substantial cuts to your R&D budget can hurt revenue in the long terms as customers will be less aware of your product and your product won't be as cutting edge.

Amid a slumping global economy HTC predicted an even worse holiday Q4 2012.  It expects revenue of T$60B ($2.05B USD) and a gross margin of 23.0 percent.  That's approximately 40 percent less revenue than HTC made last holiday season.

Source: HTC



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Consolidation
By bupkus on 10/26/2012 1:11:18 PM , Rating: 2
Perhaps an agreement between several struggling competitors to share IP and R&D efforts could bring a reduction of overhead while maintaining their unique identities in implementation.




RE: Consolidation
By GulWestfale on 10/26/2012 1:33:01 PM , Rating: 3
with SOCs being made by only a handful of companies, and screens by another handful, and OSes by either google or MS, isn't the only "unique identity" smartphone makers have their crappy, laggy, useless android skins?


RE: Consolidation
By bupkus on 10/26/2012 1:56:16 PM , Rating: 2
Maybe so, or perhaps just the contours in shape, the choice of battery, the colors and materials of outer skin, the name of the offering company.

I kind of like the idea of a t-shirt that says:
"I successfully copied Apple but only got this crappy iPhone"

Disclaimer: Not responsible for the opinions of the UK courts.


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