HTC's Q1 earnings forecast disappoints

Taiwan phonemaker blames what it calls a "product cycle transition", with rising concerns over company's future.
Written by Jamie Yap, Contributor

Taiwanese handset maker HTC's first quarter forecast for 2012 fell short of expectations, raising concerns that the company may struggle amid a "product transition" as market competition gets more intense.

In a company statement Monday, HTC said it expects first quarter revenue of between NT$65 billion (US$2.2 billion) to NT$70 billion (US$2.3 billion). This was lower than analyst estimates of NT$84.9 billion (US$2.9 billion), and could also amount to as much as a 36 percent drop from the previous quarter.

By comparison, HTC earned NT$101.42 billion (US$3.5 billion) in revenue from the last quarter of 2011.

This has raised concerns that the company remains in transit with a lack of new phone models in this quarter while market competition grows fiercer, said Bloomberg in a report.

"In 2011 we saw growth in the global strength of our brand, as well as earnings and revenue growth," CEO Peter Chou said in the statement. "While short term performance may not meet the results as expected, we have gained further experience and advancement in the areas of brand management and product innovation. These fundamental strengths and the groundwork we have laid will take us into 2012 with a renewed focus and determination."

Regarding the lowered projection, HTC said the reduced margin was due to it being in "product cycle transition", and that it will create "a new wave of momentum through the upcoming product cycle". It also said the reduced margins were a "temporary phenomenon" which will be "normalized" when the product cycle transition is complete. The company is expected to be introduce four new smartphones at the Mobile World Congress in Barcelona later this month, including the HTC Ville, Reuters reported Monday.

Bloomberg cited HTC chief financial officer Winston Yung in a conference call as reiterating that the trimmed forecast was due to "product transition". "Our weakness in first-quarter guidance also comes from facing competition in the U.S. from iPhone and Samsung. LTE handsets also didn’t meet our expectations," he added.

Bloomberg also reported last month that HTC experienced its first drop in profit in two years, when 2011 fourth quarter net income fell 26 percent to NT$11 billion (US$364 million) from NT$14.8 billion (US$511.2 million) the year before.

It is a far cry from its stellar third quarter performance which saw a 68 percent jump in profit and 79 percent surge in revenue from the same quarter in the previous year. Already when it announced these results back in November, HTC said its fourth quarter outlook was less optimistic, with projected flat, if not negative, growth.

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