HTC One launch fails to prevent sharp decline in HTC's profits

HTC One launch fails to prevent sharp decline in HTC's profits

Summary: Taiwanese smartphone maker HTC saw a large drop in profits during the second quarter of this year compared to Q2 2012, despite the launch of its flagship HTC One.

TOPICS: Mobility

Sales of the flagship HTC One phone appear to have helped the Taiwanese smartphone maker recover from a tough first quarter, but profits are still sharply down year on year.

Revenue for HTC's second financial quarter fell 23 percent year-on-year to NT$70.7bn ($2.3bn), according to its unaudited results. Operating income dropped to NT$1.05bn ($30m), a 87 percent fall compared to Q2 2012, and net income before tax fell to NT$1.52 ($50m), a year-on-year fall of 83 percent.

In contrast, Q2 operating income is well up on Q1 when operating income fell to NT$43m, the company's lowest quarterly profit since 2004.

Helping this quarterly recovery was the launch of the HTC One around the end of March this year, when it received largely positive reviews praising its build quality and fast quad core processor.

However, HTC's Q2 profits were below analyst forecasts and a recent research note from BNP Paribas predicted that third-quarter earnings are not expected to see a significant rise.

"HTC may have new products in Q3, but competition from Apple and other Chinese brands are fierce," said Taipei-based analyst Peter Liao, of Nomura Securities. "It'll be hard to keep the growth."

The smartphone maker has a number of products in the pipeline, with the mid market One Mini phone expected to launch in August ahead of handsets from competitors Samsung and Apple.

HTC was the world's 10th-biggest smartphone maker by shipments in the fourth quarter of 2012, according to analyst house Gartner.

Topic: Mobility


Nick Heath is chief reporter for TechRepublic UK. He writes about the technology that IT-decision makers need to know about, and the latest happenings in the European tech scene.

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  • Unfortunate

    I like HTC, I've had a few of their products, I even bought the HTC One. It's gorgeous.
    I would hate to see this company tank
  • I thought all of Nokia's problems would be solved by moving to Andriod?

    Doesn't seem to be working for HTC.

    "The whole high-end smartphone industry is slowing, which is not just an HTC problem," said Barclays analyst Dale Gai. "It's a saturated market."

    Revenue fell 22% to NT$70.7 billion from NT$91.04 billion a year earlier, in line with the company's guidance of around NT$70 billion.

    Hmmm....Looks like business might be slightly more complicated than fanboys like to make it appear. Let's see. We're in a maturing market with fewer and fewer sales. Move to Android for cheaper costs in race to bottom, or move to Windows phone while focusing on differentiation and higher margins? That's a pretty simply answer when Samsung and Motoroogle have already begun their race to the bottom.
    • my thoughts exactly...

      I mean even the biggest of them all Samsung is not immune from the slow down in growth due to maturing market.
      Samsung just announced weaker than expected profits and their shares fell 3.8% immediately and 15% since June. This is from a company that makes close to 95% of all Android profits.

      The bottom line is the type of growth seen in the mobile sector in the last couple of years cannot be sustained indefinitely. sooner than later, the market will get saturated and the growth will have to level off.

      With this type of near saturated market, Nokia's best chance is not to be just another copy-cat Android phone maker but by being able to differentiate itself from the herd.

      Sticking with the still evolving and improving Windows Phone with a small market share but a big potential for competition displacement growth is the best option if you ask me.
      • Let's see if Nokia will meet expectations

        There are many signs it will not.
        Smartphone market growth is slowing down, but it's still growing a lot and will remain huge for the years to come. HTC is doing poorly not because of android but because they are not doing it properly, many other manufacturers are growing, Sony per ex is selling smartphones as never before.
        As it is now, I don't see how going Windows was good for Nokia, they lost huge share since they dumped symbian.
        There is a solid iOS, some minor players, tizen will soon be gone, and all the rest will be android - you can try to fight it or join the best.
        • Windows ecosystem

          sorry, I don't see the future the way you do.

          I don't know what you expect but when a company switches to a new OS or creates a new OS (in case of apple in 2007), it naturally has to start from zero percent share. You were expecting all the Symbian licenses to port directly to windows?

          The way, I see it, Microsoft with the huge resources at their disposal is in the mobile OS race fro the long haul. They are going to keep on leveraging their strengths in other sectors like desktop and cloud services to create a compelling ecosystem where Wp is a part of the full story.

          Also, I want to say that the mobile OS space is big enough for many players to survive. Just like in the desktop, 95% share by windows did not kill of MacOS and Linux for more than 20 years now.
          • Elop promised that

            The idea was a 1 to 1 conversion from symbian to android - ambitious, for sure - but they don't even got close.
    • Re: I thought all of Nokia's problems would be solved by moving to Andriod?

      Let's put it this way:

      HTC, with all its woes, is still making money from Android.

      Nokia, with all the so-called improvements in sales, is still losing money hand over fist from Windows Phone.

      Which company would you rather be an investor in?
      • At this point neither.

        But if I had to Nokia. They just bought out Siemens in their joint venture, which is expected to start making them a good deal if money soon. They also have phone offerings distinct from Samsung (they basically are android for phone anyway), which could help them in the future as the market saturates.
        Sam Wagner
      • Calling BS on this. Nokia has very good profit margins on WP

        Let's see a link to your source. Yeah thought not.
        Johnny Vegas
        • Re: Nokia has very good profit margins on WP

          Not according to its last few quarterly results, as reported right here on ZDNet.

          The only thing helping to keep Nokia's losses from being even worse right now is Asha.
        • There are those links

          Unfortunately "spam filter" is not allowing me to post them :(
      • Losing money hand over fist from Windows Phone?

        Haven't read that, but what I have read is that Motorola went "All Android" to the tune of mounting loses quarter over quarter, needing to be "bailed out" by Google in terms of it's purchase by Google.

        HTC dropped 83% in a year, yet they have only 2 Windows phones, all the rest Android.

        If you're trying to say that Android is growing these companies, the numbers are saying otherwise.
        William Farrel
        • Post the numbers for all android companies :P

          Don't give me 2 or 3 examples.
          Look at Sony, LG, many Chinese makers, ...
        • Re: Motorola went "All Android" to the tune of mounting loses quarter over

          Something to do with none of their products actually being much good?

          As far as I'm aware, every other Android OEM is making money from it.
  • Moderation?

    ZDNet's idea of moderation is not posting a comment because it contains " words or phrases" that are seen in spam.