Taiwanese smartphone maker HTC Corp (TPE:2498) has started sinking with no visible signs of a turnaround. In the latest sign of disappointment, the company said it expects to incur losses in the third quarter. It would be the first quarterly loss for the company since 2001, when the smartphone maker started reporting its earnings to Taiwan Stock Exchange.
HTC says share buyback is only option
HTC Corp (TPE:2498) has been marred by supply chain constraints, departure of several top executives and fierce competition. Not too long ago, its was only second to Apple Inc. (NASDAQ:AAPL) in the U.S. smartphone market. But now the company is suffering from narrowing margins as it plans to expand the range of mid-level devices amid slowing sales of high-end smartphones, says Eva Dou of The Wall Street Journal.
HTC Corp (TPE:2498) CFO Chang Chia-Lin said that a share buyback was the only option to boost the wilting stock price, which has tumbled to eight-year lows. There were several supply chain problems with the company’s flagship HTC One smartphone, which delayed the launch of the device. Had the components been supplied on time, HTC One would have hit the market one full month ahead of Galaxy S4. Now analysts believe that the device has reached its peak in May, and is expected to decline 40%-50% from Q2 to Q3.
Challenges on all fronts
Dennis Chan, an analyst at Yuanta Securities, said that HTC Corp (TPE:2498) is facing challenges on all fronts. Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) has started cutting prices of its smartphones. It will put further pressure on HTC Corp (TPE:2498). The company expects Q3 operating margins between 0% to -8%. Its Q2 operating margin stood at 1.5%. Research firm Gartner shows that HTC’s smartphone market share has fallen from 9.3% last year to 5.3% in the first quarter.
HTC Corp (TPE:2498)’s CEO Peter Chou said he had high expectations from China, but even that market is getting increasingly competitive with the entry of low-end smartphone vendors. HTC Corp (TPE:2498) shares have fallen from NT$305.00 at this year’s beginning to NT$171.0 today. The company expects Q3 revenues to decline 15% to 29% from NT$70.2 billion in the same period a year ago. The company now expects Q3 revenues to come between 50 billion and 60 billion New Taiwan dollars, well below the consensus estimate of NT$66.7 billion.
The company has planned a high profile marketing campaign featuring Robert Downey Jr., which will further weigh on its margins. The possibilities of a turnaround are dim.