Taiwan's HTC Q3 net falls 79 percent, lags forecasts

TAIPEI Mon Oct 8, 2012 9:45am BST

People walk past a wall displaying mockup HTC mobile phones at a shopping mall in Taipei November 24, 2011. REUTERS/Pichi Chuang

People walk past a wall displaying mockup HTC mobile phones at a shopping mall in Taipei November 24, 2011.

Credit: Reuters/Pichi Chuang

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TAIPEI (Reuters) - Taiwan's HTC Corp, the world's fifth-largest smartphone maker, said its third-quarter net profit fell 79 percent, missing forecasts, as its flagship phones failed to keep pace with Apple Inc's iPhone and Samsung Electronics Co Ltd's Galaxy range.

The former contract maker has been suffering a sharp decline in its fortunes since the second half of 2011 following a fairytale ride when it built a strong global brand with phones based on Google Inc's Android software.

Unaudited July-September net profit was T$3.9 billion ($133.17 million), the company said on Monday, down from T$18.68 billion in the same period a year earlier and T$7.4 billion in the previous quarter. It did not elaborate. Earnings had been expected to drop to T$5.57 billion, according to a Thomson Reuters I/B/E/S survey of 21 analysts.

Samsung Electronics reported a record quarterly profit of $7.3 billion on Friday, nearly double last year's figure, thanks to strong sales Galaxy smartphones as well high-end TVs.

"I expect HTC's margin was down 2 basis points compared to Q2 due to a change of product mix. HTC was cutting prices and its low-end phones were selling better," said Yuanta Securities analyst Dennis Chan in Taipei.

"The new models we saw in the past few weeks are not going to change the game. It will be able to keep its market share, but we won't see much pick-up," he said.

In the past few weeks, HTC has aggressively rolled out new models to regain market share in the fourth quarter. It released the "HTC J" targeted at the Japanese market last month and the "HTC One X+," an upgraded version of its high-end flagship model last Tuesday, both running on Google's operating system.

Last month, it also introduced two colourful models running Microsoft's Windows Phone 8 software, the Windows Phone 8X and the Windows Phone 8S, among the first in the market.

HTC's third-quarter revenue was T$70.2 billion. The company said in August it expected its third-quarter revenue to be T$70 billion to T$80 billion, compared to T$91 billion in the second quarter.

HTC shares closed down 0.86 percent at T$287 before the earnings were released, while the broader market fell 0.97 percent.

"Before we turn more structurally positive, we would like to see its flagship models contributing a large portion of its business, as its strategy of reducing its number of models leaves it much in need of a hit model for 2013. Until then, we see margins posing a downside risk," wrote Goldman Sachs analyst Robert Yen in a research report.

(Editing by Matt Driskill)

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