HTC Makes Deep Cuts to R&D, Marketing, Amid Financial Panic
October 26, 2012 11:55 AM
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Troubled investments and troubled sales equate to a troubled HTC
Taiwan's HTC Corp. (
) is in trouble.
Struggling in global sales
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
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. (
) 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.
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.
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.
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RE: Merger is only solution.
10/28/2012 8:10:28 PM
I don't want to sink your ship, but even as an idealist this is complete fantasy. I don't disagree, this would be a great strategy except for a fatal flaw: You're talking about merging one Canadian, one American, one Finnish, and one Taiwanese company - that is practically every embedded culturally different management style that exists in the mainstream. It would be an epic accomplishment, not just because of the technology, but in management research it would be just huge. Like - if they pulled it off all of the managers would become millionaire consultants for successfully handling that merger.
I'm an idealistic 25 year old that is still naive when it comes to what is possible and what isn't, but I can tell you that is incredibly, incredibly, far fetched of an idea.
"I modded down, down, down, and the flames went higher." -- Sven Olsen
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