Bloomberg News

HTC Posts Record Profit Drop as Samsung, Apple Grab Sales

October 08, 2012

HTC Net Income Declines by Record as Samsung, Apple Grab Sales

A man walks past the HTC Corp. logo at the unveiling of the HTC J smartphone held by HTC Corp. and KDDI Corp. in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

HTC Corp. (2498), Asia’s second-largest smartphone maker, dropped the most in three months in Taipei trading after quarterly profit fell by a record as competition from Samsung Electronics Co. and Apple Inc. (AAPL:US) drove down sales.

HTC declined by the 7 percent daily limit to NT$267 as of 10:24 a.m., headed for the biggest loss since July 5. The stock has lost 46 percent this year, lagging behind a 7.7 percent advance for Taiwan’s benchmark Taiex (TWSE) index.

Third-quarter net income dropped to NT$3.9 billion ($133 million), the Taoyuan, Taiwan-based company said in a statement yesterday. That was a 79 percent decline from a year earlier and missed the NT$4.43 billion average of eight analysts’ estimates compiled by Bloomberg in the last 28 days.

HTC, maker of the One, Sensation and Desire handsets, lacked a “sense of urgency” while “bureaucracy crept in,” Chief Executive Officer Peter Chou said in an e-mail to employees in August. New models using Microsoft Corp.’s Windows and Google Inc.’s Android platforms may not be enough to offset continued gains by Samsung’s Galaxy and Apple’s iPhone models.

“HTC’s newly launched smartphones will not be a game changer for the company,” Richard Ko, who rates the stock underperform at KGI Securities Co. in Taipei, wrote in a report yesterday after the announcement. “Competition in the smartphone space remains intense across all segments. We believe Apple and Samsung will continue to lead on brand, distribution channel, scale and cost.”

Revenue Miss

Third-quarter revenue fell 48 percent to NT$70.2 billion, missing the NT$75 billion average of eight analysts’ estimates compiled by Bloomberg in the last 28 days. The company on Aug. 3 forecast revenue of NT$70 billion to NT$80 billion. Operating income declined 76 percent to NT$4.9 billion.

HTC’s share of the global smartphone market by shipments fell to 5.8 percent in the second quarter from 10.7 percent a year earlier, according to data compiled by Bloomberg Industries. The company released its first models based on Windows Phone 8 in September, and last week announced revised versions of some Android-based devices.

Samsung, the world’s largest maker of mobile phones, last week reported record third-quarter operating profit, buoyed by continued gains by its Galaxy phones and tablets. Sales of the Galaxy S III passed 20 million units in the 100 days after its debut, the company said in September.

Apple sold 5 million units of its iPhone 5 in the first weekend after sales commenced in nine countries on Sept. 21, it said at the time. The Cupertino, California-based company began selling the device in 22 more countries on Sept. 28.

‘Kill Bureaucracy’

HTC needs to “kill bureaucracy” as “we have people in meeting and talking all the time but without decision, strategic direction or sense of urgency,” Chou wrote to workers in an August e-mail obtained by Bloomberg News. “Stay firm with the hero innovations,” he wrote.

HTC’s sales and operating margins may decline further in the fourth quarter, Kevin Chang, an analyst at Citigroup Inc. in Taipei, wrote in a note. Citigroup has a sell rating on the stock and a price estimate of NT$192.

Fourth-quarter net income may drop to NT$5.2 billion, the fifth straight decline, on revenue of NT$76.5 billion, according to estimates compiled by Bloomberg in the last 28 days.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.


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