Taiwanese smartphone maker HTC has warned that it expects to slide to its first-ever loss during the third quarter, as its second-quarter profits slumped 83% year on year. HTC announced profits of just NT$1.2bn (£26.3m) on revenues of NT$70.7bn, down 22%.
Amid signs that the top-end smartphone business is becoming saturated, and with its HTC One flagship phone being pressured by its larger rivals Samsung and Apple, the company warned that revenue could drop to between NT$50bn and NT$60bn in the current quarter to the end of September, with operating losses "in the range of 0% to 8%" – which could be up to NT$4.8bn.
The company hinted that some of the losses will be from excess inventory from the HTC First, which used Facebook's Home app as an overlay on Android. AT&T reportedly sold very few and killed the product in May, within weeks of its launch.
"They are definitely in trouble," said Francisco Jeronimo, smartphonesanalyst for the research company IDC. "For a company that was awarded 'best smartphone in the world' for its HTC One, which is meant to be its flagship, if they can't make a profit from it, that's quite concerning."
He warned that the company was low on cash, and that without profits it could face serious challenges to its survival in the future. HTC's balance sheet shows that it had cash and short-term equivalents worth NT$51.9bn at the end of the first quarter; the second-quarter figures are not yet available.
That could make it a takeover target for larger Chinese rivals if it is unable to reverse that trend. In the mobile handset business, only LG and Sony have managed to recover from making an operating loss – helped by their larger parent operations. HTC cannot call on the same resources, however. Jeronimo also questioned whether Chinese handset makers would want – or would be allowed by the Taiwanese government – to buy HTC.
Source: The Guardian
