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HTC: ‘One’ Not Enough, Q3 Crash

HTC forecasts 3Q sales to slump  as much as 30% to NT$50-NT$60 billion, according to financials released yesterday, which showed second-quarter sales of NT$70.7 bn (A$2.6bn), net profit NT$1.25m.  

Third quarter operating margin is expected slide to 0%-8%, gross margin as much as 5%. However, Q2 wasn’t much better – HTC reported operating margin of just 1.5%, although gross margin was better at 23%.  

The Taiwanese mobile maker insists, however, its flagship ‘One’ smartphone “performed well better than that of our hero products for the same period last year.” 

“We aim to extend the momentum as we enter into the second half of 2013.” 

Despite releasing what is hailed as one of the best Androids this year, HTC has struggled in the face of stiff competition from Apple, Samsung and newcomers like Huawei, LG – all major conglomerates with plenty cash behind them. 

The company said gross margin has been impacted by the relatively higher cost structure, lack of economy of scale and certain provisions needed to clear aging products in the channel. “Actions have been taken and we expect to see improvement in Q4.”

Following its latest dismal performance, there is now even talk of a possible buyout of the Taiwanese company by a Chinese operator. 

“Renewed strength”

However, CEO Peter Chou says the results were expected and insists demand for its flagship One is growing, with sequential growth in the US, Asia, and “renewed strength ” in Europe.

In China, a critical market, sales of HTC’s high-end models “improved, while competition at the mid-tier and affordable intensified,” it admitted. 

Once the biggest Android maker, it plans to expand its “competitive” mid-tier devices, in the same vein as rival Samsung, hopes to regain lost market share by Q4.  

“My leadership team continues to focus on execution,” said Peter Chou, in a statement.  

“We are seeing expected results as we fill the channels and meet demand for the new HTC One. As we broaden our focus to include a new member of the HTC One family, the recently announced One mini, we are looking forward to delivering great products and results in 2H.”

It also ramped up manufacturing the US, noting sequential growth in 2Q, and  expansion in retail channels. HTC also gained in Taiwan, Hong Kong, Japan.

“The new HTC One has also helped the company establish strong brand awareness,” it said in a statement. 

“With the help of HTC One, we have regained superphone market share across major markets including China.”

HTC senior management team has been shaken up with several execs departing the company, and yesterday announced Jack Yang as president of South Asia, Sirpa Ikola to senior director of marketing for South Asia, and Lorain Wong as global PR VP.