Bloomberg News

HTC Sees New Devices and Marketing Effort Driving Turnaround (2)

February 06, 2014

HTC One Mobile Phone

An HTC Corp. One mobile phone is displayed at the IFA consumer electronics show in Berlin. Photographer: Krisztian Bocsi/Bloomberg

HTC Corp. (2498) said an updated version of the One smartphone, its first wearable device and a renewed focus on marketing will help turn around the company this year after two straight annual declines in revenue.

“We feel positive and optimistic about 2014 when compared to 2013,” Chang Chialin, chief financial officer and head of global sales for the Taoyuan, Taiwan-based company, said in an interview yesterday at Bloomberg’s headquarters in New York. He declined to provide a forecast ahead of an investor conference call scheduled for Feb. 10.

Once the leading smartphone maker in the U.S., HTC’s sales dropped 30 percent last year as product delays and a shrinking marketing budget caused it to lose share to LG Electronics Inc. and Lenovo Group Ltd. A wearable device will be available by this year’s Christmas shopping season after years of development and technical challenges, Chairman Cher Wang said.

“Many years ago we started looking at smartwatches and wearables, but we believe that we really have to solve the battery problems and the LCD light problems,” she said in the interview. “These are customer-centric problems.”

HTC shares fell 53 percent last year, their third annual decline, while revenue dropped to NT$203.4 billion ($6.7 billion) and it reported its first annual net loss. Its sales and marketing budget dropped 20 percent in 2012, and was 9 percent lower for the year through Sept. 30, according to data compiled by Bloomberg.

Renewing Marketing

The stock climbed as much as 1.6 percent in Taipei today after Bloomberg News reported the executives’ comments, and closed 0.4 percent higher at NT$129.50, its first increase in six trading sessions.

Wang, who co-founded the company with Chief Executive Officer Peter Chou and former CEO H.T. Cho in 1997, said HTC plans to renew its marketing efforts after last year’s well-received One smartphone failed to boost revenue.

“To tell the truth, we never think marketing is that important -- this is really not very good,” Wang said. The executives declined to say whether HTC’s marketing budget would rise this year after the company last year signed actor Robert Downey Jr. for $12 million to represent it.

Reaching Audiences

“It’s really not only the budget increase, it’s the way how you spend the money. Is it smart?” Wang said. “There’s a lot of ways to reach the audience right now.”

An increase in revenue this year would be HTC’s first since a 67 percent climb in 2011. The company is expected to post a 5 percent drop in sales to NT$193 billion according to the average of 29 analysts estimates compiled by Bloomberg. Net loss will narrow to NT$795 million, the estimates show, from NT$1.3 billion last year.

“It’s a good thing that they’re recognizing the importance of marketing,” Dennis Chan, who has a sell rating on the stock at Yuanta Financial Holding Co. in Taipei, said by telephone. “I need to be hearing some good pre-order volume for their flagship handset, which I am not hearing yet” before upgrading the stock.

The company will release its next HTC One model in March, featuring a twin-sensor rear camera and a larger screen, Bloomberg News reported last month, citing a person with direct knowledge of the plans.

A wider array of products this year will help HTC find consumers in more segments of the market after it relied on its One and Desire series for most of its revenue last year.

‘Robust Portfolio’

“2013 wasn’t a very good year for HTC,” Chang said. “We have to admit we took our eyes somewhat off the ball in making sure we have a robust portfolio in the mid- and affordable end, which we’re fixing now.”

Chang, who became CFO in 2012, took up his concurrent job as head of global sales in December, giving the former Goldman Sachs Group Inc. managing director an increased say in management of the company. Wang declined to comment when asked whether Chang is being prepared for a greater role at HTC, instead reiterating her support for Chou as current CEO and president.

Wang, the largest shareholder, isn’t considering taking HTC private and hasn’t been in talks with possible acquirers, instead expecting it to remain a standalone company, she said.

“I haven’t been approached,” Wang said. “I think they didn’t approach me because I think they know me and they know I am not going to sell.”

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net; Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net; Nick Turner at nturner7@bloomberg.net


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