HTC Q3 loss worse than expected, could go more Windows

HTC Q3 loss worse than expected, could go more Windows

Summary: The smartphone maker posted its first quarterly operating loss, at NT$2.97 billion (US$101 million), amid intensifying competition and rising costs. Meanwhile, Microsoft is reportedly courting it to carry more Windows-based handsets.

SHARE:

Taiwan's largest smartphone maker HTC confirmed its first quarterly loss, following its profit warning in July amid intensifying competition and rising costs, partly from making its flagship handset HTC One.

htc-one-2
HTC posted its first quarterly operating loss, at NT$2.97 billion (US$101 million).

HTC booked a third quarter net loss, at NT$2.97 billion (US$101 million) for the three months ended September, according to its statement on Friday. Sales were below expectations, coming in at NT$47.05 billion (US$1.6 billion), missing its forecasted range of NT$50 billion (US$1.7 billion) and NT$60 billion (US$2.04 billion).

For the same period last year, the company had reported a net profit of NT$3.9 billion (US$132 million) and a revenue of NT$70.2 billion (US$2.39 billion).

In July, HTC had issued a profit warning because of gross margin challenges and the high cost structure in making its the HTC One smartphone. CEO Peter Chou had said he expected the third quarter to be its worst, and the company was taking action to improve profitability by reducing building materials cost and further optimizing operations.

Last week, HTC had sold off its remaining 25 percent stake in high-end headphones maker Beats, which analysts said could help prop up its bottomline for the financial year. The stake sale was expected to generate about NT$2.52 billion (US$85.4 million) in pretax profit. It had bought a 51 percent stake in 2011 for US$300 million dollars, but sold half of it back last November for US$150 million.

Windows the key to HTC's revival?

Microsoft has been in talks with HTC to add more Windows-based phones to its lineup at little or no cost, according to Bloomberg on Friday.

Terry Myerson, head of Microsoft's operating systems unit, had reportedly asked HTC last month to load Windows Phone as a second option on handsets besides Google's Android, said two sources cited by Bloomberg. They added the cutting or elimination of the license fee was discussed, but talks are still preliminary.

HTC was the first company to make both Windows and Android phones, but has not unveiled a new Windows-based handset since June, noted Bloomberg.

Microsoft, in a bid to expand its 3.7 percent marketshare, has been pushing to line up other new partners, with CEO Steve Ballmer and other executives meeting handset makers last week in Beijing, according to the report. This follows last month's proposed acquisition of Nokia's handset unit, which was the biggest among the relatively few manufacturers backing the Windows Phone 8 operating system.

Topics: Smartphones, HTC, Windows Phone

About

Loves caption contests, leisurely strolls along supermarket aisles and watching How It's Made. Ryan has covered finance, politics, tech and sports for TV, radio and print. He is also co-author of best seller "Profit from the Panic". Ryan is an editor at ZDNet's Asia/Singapore office.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

35 comments
Log in or register to join the discussion
  • HTC

    I would love a sleek HTC One with Windows Phone. HTC has always been my favorite smartphone maker but since they jumped to that pig Android their products lost their luster

    I had both the HTC HD2 and HD7. The 8X was ugly and they should just stick to making beautiful hardware (One) with Windows on it like back in the day.
    Dreyer Smit
    • Plastic HTC One

      Make a plastic HTC One in 5 colors just don't use clown colors like some other vendor did. It wouldn't hurt to offer Windows Phone or Android on it... and get a subsidy from Microsoft for putting Windows on.
      greywolf7
  • throw away the key

    ((( "Windows the key to HTC's revival?" )))

    According to Betteridge's law of headlines, no.
    buddhistMonkey
    • Well at this point

      your strategy suggests HTC should just go down swinging with Android because....
      Mr. Wet
  • HTC is losing recognition among consumers

    HTC one is probably the best designed smartphone with the best build feeling, but it must be very expensive to produce, reducing profit margins - they should try to find some middle ground - a great design and quality at a good price.
    Competition is huge and HTC made the wrong bets - beats audio and One camera technology was a mistake - give people megapixels and other sounding specs - even if it's just marketing crap - who cares about audio quality these days? me and a few ones.

    Going against Nokia in WP land must be like 2 times harder than fighting competition in android land - if they can easily adapt their line-up of phones to WP, it's the right thing to do, if the investment required is large, it's a wrong move.

    HTC can be another smartphone maker on the way out.
    AleMartin
    • Re: but it must be very expensive to produce

      A truth, anyone who attempts to out-Apple Apple learns soon or later.

      Indeed they should find a middle ground. I do agree their camera experiment was a bit strange. Any photographer knows that higher resolution is not necessarily bad, if the total fidelity produced by the sensor is better. Bad is higher resolution when only the resolution and nothing else improves -- because then the total image fidelity degrades.
      It was obvious, the lower resolution of the HTC One was hurting the results in many usage scenarios.

      As for the audio... why should making good audio out of any electronic device cost much more? It is not necessary to invest in high quality speakers, because almost no mobile device is used standalone in speaker mode -- with the expectation of high quality audio. If someone wants high quality sound they will use an appropriate accessory -- a cheap (larger) speaker will almost always produce much better output. I believe in this case they felt obliged to use their investment in Beats...

      HTC going WP will be suicidal.
      danbi
      • Going android was suicidal. They were having fantastic success as a windows

        device company. They will be gone in 18 months if they stick with android.
        Johnny Vegas
        • "They were having fantastic success as a windows "

          Did anyone ever have fantastic success as a mobile windows device company? Or you're simply delusional?
          eulampius
        • Re: They will be gone in 18 months if they stick with android.

          It took Nokia less than 18 month to sink, after their first Windows Phone device. Obviously, HTC has been able to survive much longer offering phones with Android.

          In any case, HTC might sell at better price to someone else, not Microsoft.
          danbi
  • Android holy grail, no?

    So much for the "Android is the holy grail for all struggling handset makers" BS.

    If the current discussions between MS and HTC succeeds and HTC puts more emphasis on Windows Phone and as a result their lot changes for the better, I wonder how the Android aplogists will twist the story.....
    ideleosaretin@...
    • Tell me a WP phone maker

      That is not struggling.
      You are right there are no holy grails - they must be better than the others.
      AleMartin
      • Not actutally..

        The phone singularly responsible for increasing WP's tiny market share is the least expensive model. The Lumia 520 which is dirt cheap off contract. HTC's problem is people are not buying their low end devices (They are buying Samsung's) and the mind share of Android devices is focused on the Samsung GS models.

        Samsung has the low end market sales advantage and the high end mind share advantage over any other Android OEM. Nokia also has the same advantage with WP OS.
        Mr. Wet
        • Re: Lumia 520 which is dirt cheap off contract.

          Why? Did it ever occur to you that it might be in fact subsidized?

          People buy Nokia for the good memories of their S40, S60 and Symbian devices. Low-mid range Nokia phones have always been good (as phones). Nobody will buy Microsoft Lumia phone for the same reason.

          The OS is pretty much irrelevant.
          danbi
          • A subsidized off contract phone

            Your logic never fails to fail.
            Emacho
          • It happens :)

            Not sure if it's a common thing across many countries.
            But in some places, operators don't mind to subsidize phones without locking them or locking people to a contract for a period of time.
            It can be a marketing strategy, and if someone is getting a phone with sim card and an "offer" of minutes or some data, it will probably stay with the operator for enough time to pay for the phone.
            Obviously nobody is going to offer an iPhone for $100 like that :)

            Also Nokia can be selling it at cost... or even below that (they have posted losses in the last quarter).

            The definition of "subsidized" can become tricky...
            AleMartin
          • In some places... can be... probably...

            Lets try not redefine terms or suggest ambigious exceptions to the normal practices in effort to justify Danbi.
            Emacho
          • Emacho: Your logic never fails to fail.

            It sometimes helps to think with your own head.
            It always helps to know facts. Some of us do, for a change.

            As for ideleosaretin's comment: it is fine for me if you believe I have no favorable opinion of Microsoft, because of some "fanboy hate". Whatever floats your boat, pal.

            Yes, I am betting money on the statement: "...Nobody will buy Microsoft Lumia phone for the same reason...."
            The same reason being "People buy Nokia for the good memories of their S40, S60 and Symbian devices. Low-mid range Nokia phones have always been good (as phones)."
            How much?

            I know (past) Nokia phone quality first hand. I know customer loyalty to Nokia first hand. No idea about you. Again, knowing some facts is always better than speculating. And I know ... things.


            William.Farrel: I am not employed. I do employ others.
            Try something more creative next time.
            danbi
          • amazing....

            how you consistently try to spin everything to be anti MS...

            I was reading some comments about you some days back on another article on this site, where somebody was asking you why you have so much beef against Microsoft?

            The purchase of Nokia by MS has not even be approved by the regulators but you are already in the know what people will buy.....wow

            Are you very sure of this comment? "...Nobody will buy Microsoft Lumia phone for the same reason...." ???????? you can place your money on this?

            My candid advice to you is to try and get a life because Microsoft will be around for a long long time.....and if you keep on this your obsession, you will be a sad person fro a long time to come.
            ideleosaretin@...
          • Time to trade in your old Spin Machine.

            Seems it's allowing your worry to show through into your posts, which kind of makes you and your posts pretty much irrelevant.

            Are your Spin Machines subsidized by your employer, or do you get reimbursed for a portion?
            William.Farrel
          • William.Farrel: Time to trade in your old Spin Machine.

            You have an brand new one from Microsoft on sale?
            Why? Nobody wants it??? :-)
            danbi