HTC Corp (TPE:2498) has reported 79% decline in its quarterly profits, following increased competition from industry giants Apple Inc. (NASDAQ:AAPL), and Samsung Electronics Co. Ltd. (KSE:005930). The company reported NT$3.9 billion for the quarter, or $133 million, missing the analyst average of NT$4.43 billion, or $151 million, estimated by 8 analysts. According to Peter Chou, the CEO of the Taoyuan, Taiwan-based company, HTC lacked a sense of agency amid intense bureaucracy in operations.
HTC Corp (TPE:2498) is facing an onslaught from the two industry giants, Samsung electronics and Apple Inc. (NASDAQ:AAPL), with its new iPhone 5 device, which has broken all sales records as we know them to date, amid a growing global demand. Additionally, HTC is also facing competition from unbranded handsets from China, with their low cost being a major force.
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The unbranded, or otherwise referred to as white boxes, handsets are likely to remain a major predicament for the Taiwan smartphone maker, while Apple’s iPhone 5 sales, which are expected to soar further during the December quarter, will surely tramp any hopes of a rebound for HTC.
The company’s revenues were down 48% to NT$70.2 billion, yet again missing analyst target of NT$75 billion. HTC’s latest profits are the lowest since the company started selling cell phones under its brand name. The NT$3.9 billion also falls below the NT$4.46 reported for the first quarter in 2012, following a substantial decline in it market share.
Furthermore, analysts are very skeptical about the success of HTC’s new windows 8 phones, as the popularity of the O.S., is still unproven, and hence remains uncertain.
Fubon analyst Jeff Pu, is quoted in a statement saying, “Microsoft Corporation (NASDAQ:MSFT)’s Windows 8 is a weaker ecosystem, which supports only about 100,000 applications, compared to more than 600,000 for Android and over 800,000 for Apple’s iOS, and brand makers will have difficulty differentiating themselves, due to limited room for user interface customization. Hardware competition will only lead to lower profit margins”.
In some of our analyst surveys, we have highlighted the market share of Windows phone to be lagging behind the two major ecosystems, that is, Google Inc (NASDAQ:GOOG)’s Android O.S with more than 64%, and Apple Inc. (NASDAQ:AAPL)’s iOS at about 18%. Windows phone’s market share is about 2.7% and faces a major predicament in its inability to customize to various devices.
The U.S., Apple Inc. (NASDAQ:AAPL)’s home ground is believed to account for about 50% of HTC’s revenue, and about 40% of he smartphone sales. This is a very high figure, considering that in the U.S., only Apple and Samsung command the market, which means HTC is left to scramble for the pieces with other minor players in U.S., like Nokia Corporation (NYSE:NOK) and Research in Motion (NASDAQ:RIMM) (TSX:RIM)’s BlackBerry.
Additionally, HTC Corp (TPE:2498) is facing competition from China’s ZTE Corp. (ZTE) (000063.SZ) and Huawei Technologies Co. (Huawei), which have come up with cheaper smartphone devices targeting the middle class market segment, are expected to dent the company’s market share in Asia, and other emerging markets, thereby dimming the outlook of the Taiwan-based smartphone maker.
Additionally, the likes of Apple Inc. (NASDAQ:AAPL), Samsung Electronics Co. Ltd, and Nokia Corporation (NYSE:NOK), are also coming up with mid level targeted smart devices, with Apple, using its iPhone 4 and 4S for this cause, along with a looming iPad mini.