HTC: The sales mojo is gone as it falls behind Android curve

Summary:HTC cuts its sales outlook for the second time in the fourth quarter as it falls behind in the Android race.

HTC has cut its fourth quarter revenue outlook and said sales will be flat with a year ago, or NT$104 billion ($3.4 billion). Analysts had been looking for sales of NT$130 billion.

In other words, HTC, which already disappointed with its revenue outlook just a few weeks ago, is seeing its business crater as it struggles to compete with not only Apple, but Android rivals such as Samsung and Motorola Mobility. HTC last month projected sales of NT$125 billion to NT$135 billion.

These HTC phones aren't selling.

As previously reported, HTC is facing a lot of headwinds for 2012. It looks like those headwinds have already arrived courtesy of a bevy of smartphone launches this quarter.  HTC is an interesting squeeze as Samsung moves to establish itself as the alpha Android partner. Also see: HTC: Challenges going into 2012 mount as Q4 unit outlook weakens

In a statement, HTC said:

Due to global macro economic downturn and market competition, the assumptions of 2011 Q4 financial forecast provided earlier are no longer applicable. HTC expects 2011 Q4 revenue to be approximately the same as Q4 last year. Despite 2011 Q4 revenue is not what we expected, HTC has strong confidence in its products and operation. We expect that growth will return in 2012 H1.

Of course, the big question revolves around what HTC has in the pipeline to juice growth. HTC's lineup at the Consumer Electronics Show will be closely watched. If its new product portfolio disappoints HTC will be in major trouble.

In a research note, Macquarie analyst Daniel Chang said:

We believe HTC needs to find a way to penetrate the mid- to low- end market and drive volume while regaining its technological leadership at the high end. Unfortunately, HTC seems uncompetitive at both yet – at the high end, its peers adopted AMOLED and Android 4.0 OS earlier than HTC, and at the low end, HTC is unwilling to be price aggressive due to a higher cost structure. We think it may take another 2-3 quarters to prove.

Chang is worth listening too---he called HTC's latest troubles.

Separately, HTC said it is re-evaluating the purchase of S3. HTC paid $300 million for S3 largely so it could have patents to combat Apple. Apple won an International Trade Commission ruling that may render the purchase of S3 moot. HTC said in a statement:

HTC is disappointed at the outcome of the recent ITC ruling that stated Apple did not infringe S3 Graphics' patents. S3 Graphics will continue to appeal. HTC has made significant effort in preparing for these complicated legal proceedings, including a complete legal investigation and comprehensive report on patent and price evaluations. HTC had decided to acquire S3 Graphics based on the strong belief that evidences of patent infringement from Apple were clear and ITC ruled in its initial determination that Apple had infringed two patents from S3. In light of recent development, HTC will work closely in good faith with VIA Technologies and WTI Investment International.

See: CNET: HTC may back out of S3 buy after legal defeat

Related:

Topics: Enterprise Software, Banking, HTC

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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