HTC expects Q4 dip; higher volume, time to market key to revival

As the Taiwanese smartphone maker braces for revenue to drop further, it believes the way up is in regaining market share in the mid and low-end, improving operational efficiency, and not neglecting a fast time to market.
Written by Ryan Huang, Contributor on

HTC is bracing itself for a challenging holiday season, as it forecasts fourth quarter sales to come in lower than the previous three months.

chialin chang
Chialin Chang, CFO of HTC.

Fourth quarter revenue is expected to be in the range of NT$40 billion (US$1.3 billion) to NT$45 billion (US$1.53 billion), said Chialin Chang, chief financial officer of HTC, during its Q3 earnings call on Tuesday. This compares with revenue of NT$47 billion (US$1.59 billion) in the recent third quarter ended September, when it recorded a worse than expected net loss at NT$2.97 billion (US$101 million)

Gross profit margin is forecast to be largely unchanged at around 20 percent. This compares with a 20.4 percent margin in the third quarter, which was lifted by the sale of its remaining stake in Beats Audio for US$265 million to focus on its own proprietary sound technology, HTC BoomSound.

HTC expects to push down costs further, expecting final quarter operating expenses to be not more than NT$10 billion (US$340 million) by leveraging "operational efficiencies", compared with NT$13.1 billion (US$445 million) in the previous three months.
According to Chang, HTC has been doing "various tactical things to go beyond Q4".

A main thrust to the company's plans appears to be generating more sales volume, which Chang said would allow for "profit optimization", partly from scale benefits and eventually lead to "profit maximization". The CFO added HTC was looking at all segments but especially wants to "plug the gaps" in the mid and low-end tiers to regain lost market share.

rev profit
HTC posted its first loss in the third quarter ended September, and is bracing itself for a tough and possibly worse final quarter. (credit: HTC)

In response to a query over pricing strategy, where HTC's phones have been deemed too expensive in some markets, Chang pointed out there were other important factors to consider.

For example, a fast time to market was just as important, he added. Chang pointed out that even if a phone was priced cheaply, it would not matter if the product missed its window and was left with a shorter life cycle for sales. Other factors determining success included branding, and design and innovation, he outlined.
The company's flagship HTC One handset was a victim of such time to market delays earlier this year, partly due to manufacturing issues. This allowed rivals such as Samsung to gain ground with its Galaxy S4.

On the marketing front, HTC noted its marketing campaign, which features actor Robert Downey Jr., has been a success in ramping up consumer engagement and positive sentiments. Advertising awareness rose by 12 percent and brand momentum increased by 15 percent in markets where the campaign was aired, according to the company.

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