HTC Q3 loss worse than expected, could go more Windows

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.

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 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.

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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.