HTC Badly Misses Profit Expectations, Delayed HTC One Final Starts to Trickle Out
April 8, 2013 1:00 PM
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Things aren't looking very good for Taiwan's top Android phonemaker
Six quarters have came and went, and in each one Taiwan's HTC Corp. (
) has seen its once rising star turn into a financial failure. But this most recent one was arguably as bad as any as the Android smartphone maker's
unaudited Q1 2013
earnings have badly missed on analyst earnings expectations.
I. Another Miss
of 19 analysts by
had predicted a net profit of NT$600M ($19.97M USD). A separate
of 16 analysts by UK-based
, a Pearson PLC unit (
), predicted a slightly leaner NT$287M ($9.56M USD). Instead, HTC managed to miss both targets, essentially breaking even for the quarter with a net earnings of NT$85M ($2.83M USD).
Revenue fell to a new low of NT$42.8B ($1.42B USD), versus a
analyst prediction of NT$54.7B ($1.82B USD) or a
analyst prediction of NT$53.8B ($1.79B USD).
HTC is on the brink of no longer turning a profit. [Image Source: Reuters]
Worse yet, the operating margin -- a measure of profitability -- was around 0.1 percent, less than the 0.5-1 percent HTC had forecasted. To put that in perspective, Samsung Electronics Comp., Ltd. (
) has a margin of 14.4 percent; while Apple has an industry-leading operating margin of around 33.46 percent.
HTC has seen its profits shattered over the last year and a half. [Image Source: Gadget Stress]
HTC's new marketing chief Benjamin Ho has tried ardently to reinvent the company's image,
scrapping its "quietly brilliant" motto
a more belligerent advertising stance
towards rivals. However, his efforts have been
hampered by delays
to HTC's flagship
HTC One 1080p Android smartphone
, delays that originated from a snub from a camera components retailer who had downgraded the Taiwanese OEM from "preferred" status.
II. More Trouble Ahead
HTC is slowly ramping up HTC One production and sales this month. However, that leaves it with a far leaner window to market before
Samsung's hot Galaxy S IV
than it anticipated. The Galaxy S IV launches on April 26.
The HTC One suffered a costly delay due to a parts snub. [Image Source: HTC]
Taipei, Taiwan-based Yuanta Securities Comp. (
) warns that the dire Q1 2013 financials may only be a precursor to the Q2 2013 bloodbath, saying that the HTC One shipping delays will cost the phonemaker. Yuanta analyst Dennis Cheng comments to
, "These numbers show the production shortage really is that bad, and my sense is that it won’t get much better in the second quarter because many of those issues continue. For smartphones, timing is everything and the delay means they lose that timing."
Sources close to the company have said that HTC's
embattled long-time CEO Peter Chou
had told employees late last year that he would step down if the HTC One did not reverse his struggling firm's fortunes.
The worst is not yet over for HTC. [Image Source: SOC Wallpapers]
largest U.S. phonemaker in late 2011
, HTC today is no longer even the second largest
phonemaker, passed by China's ZTE Corp. (
Technologies Comp. (
Aside from shipping delays one under-examined factor in HTC's decline is the cost of the
"patent tax" paid to Microsoft
, Inc. (
). While HTC did
brag about getting a "bargain" from Apple
in terms of patent licensing, and it at least no longer has to worry about bans, it reportedly must pay $10 USD per device to Microsoft and around $5 USD to Apple per device. That's far from HTC's only problem, but paying licensing fees is one more factor battering the phonemaker's margins.
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RE: What a shame...
4/8/2013 6:03:01 PM
A correlation between advertising dollars and gross sales, what a scary thought. Can you imagine such a world where this was true?
Seriously, HTC and Samsung phones (most android phones for that matter) are so similar that to trash HTC for being 5% is a joke. Pot calling the kettle black really. Wow, no removable battery and SD card, better burn it at the stake.
RE: What a shame...
4/8/2013 10:17:03 PM
Correlation, yes. But Samsung's advertising budget seems to only be brought up by embittered Apple fans or Samsung haters as a convenient way to excuse away Samsung's success. They've convinced themselves that Samsung makes pure garbage, and the only reason they sell is from commercials. How convenient.
As if we're all in the 1950's and the only way to experience products are through advertising.
RE: What a shame...
4/9/2013 12:37:27 AM
Mass advertising and good products can certainly go hand in hand, but they don't have to. Samsung outspends everyone on advertising and its a huge reason why they're as successful as they are, even when they don't make the best hardware in the Android space. You get public mindshare with billboards and TV ads everywhere and you're going to sell units. Obviously good products follow through and build loyalty, but companies need to get their foot in the door first. How can companies like HTC or LG compete with the muscle Samsung has?
All that said, a lot of this is actually self-inflicted by HTC themselves. They are
at building a brand that is recognizable by consumers. They release a new flagship every few months, each with a different naming scheme than the last.
It doesn’t matter how good HTC's individual phones are, they throw away any brand recognition they might have had and start all over again every couple of months. As much as Samsung has been outspending them and everyone else on marketing, many of HTC's current problems are partly due to their own terrible marketing decisions.
Forget copying the UI or earlier hardware designs or whatever, the smartest thing Samsung took from Apple might be their marketing and release strategy. Don't release multiple flagships a year,
Don't completely rename your product line with dozens of random prefixes and suffixes, pick a strong name and stick with it.
Smart and it sure as hell works.
If you want to name the next HTC/Motorola/LG/Sony phone, go here:
No wonder they're all floundering while Samsung and Apple are thriving. HTC would do well to pick a brand and
stick with it.
Also, this is brutal:
"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997
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