Print 27 comment(s) - last by NellyFromMA.. on Oct 29 at 12:27 PM

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 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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RE: HTC failed to address what people wanted most
By Accord99 on 10/26/2012 1:53:14 PM , Rating: 3
Except they did address what people want.

-The One X LTE has better battery life than the GS3 LTE even with the same SOC and the GS3 having a bigger battery.

-The One X also comes with what is widely regarded as the best screen ever put on a smartphone.

But that's not enough to overcome the current momentum of Samsung being THE Android phone to get.

RE: HTC failed to address what people wanted most
By quiksilvr on 10/26/2012 3:18:16 PM , Rating: 3
In other words, it all boils down to marketing. If you can't market it, no one will know about it.

Look at Google Wallet. It's been around for over a year now and we STILL have limited Pay Pass options in the country. It isn't in Wal-Mart. Or Best Buy. Or Target.

If you don't market it, people won't know about it.

By melgross on 10/27/2012 10:56:22 AM , Rating: 2
Don't compare it to Google Wallet in marketing. That's a completely different story. Businesses aren't interested in Google Wallet, and without that, no amount of marketing will force them to spend several thousand per store to support it.

By NellyFromMA on 10/29/2012 12:27:29 PM , Rating: 2
Their rep is hurt. If they can continue to demonstrate their phones are consistently good, that will restore faith. Short of that, either go budget or get out. Can't see it any other way.

RE: HTC failed to address what people wanted most
By Samus on 10/27/2012 1:37:26 AM , Rating: 2
I'm sorry but I know three people who returned their HTC One X or One S because Sense 4.0 kept force-closing their apps, a bug which wasn't addressed until AUGUST, 4 months after the phone came out!

HTC is dying because their support SUCKS.

By fteoath64 on 10/29/2012 4:20:19 AM , Rating: 2
"HTC is dying because their support SUCKS."

This and lack of innovation. Their obsession in the high-end market has cost them dearly. Why no microSd slot in One X ?. They should put two in there!!!.

By Totally on 10/28/2012 9:53:40 AM , Rating: 2
Too late after owning several HTC phones, I finally decided to look elsewhere especially when it isn't hard to find better offerings. Just because the offer one phone with good battery life now isn't a compelling reason to give them another shot.

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer

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