Squeezed out by Apple and Samsung, HTC’s woes continue

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The smartphone market giveth and the smartphone market taketh away. That’s the hard lesson HTC continues to learn after rising on Android’s tide until Samsung jumped in with both feet: HTC announced lower revenues and margins for its second fiscal quarter of the year and lowered its forward guidance yet again.

When looking at the numbers compared to the prior quarter, everything looks fine. HTC revenues rose 34.3 percent while gross profit improved by 44.9 percent. But HTC’s performance had been sinking for several quarters prior; the company warned that such was happening and lowered its guidance for three quarters prior. So why the bump up in the most recent quarter?

Early this year, HTC changed its strategy to one of consolidation. Instead of creating multiple phones — the Samsung approach — HTC designed its One line, which is more akin to the Apple approach. It took time for the One S and One X to reach sales channels to help the company’s finances. And after using both devices, I can see why sales figures got  a boost; the One X in particular is a super smartphone.

A single hit won’t turn into a long-term success; at least not for HTC. That’s why I suspect the company has lowered guidance for the third quarter, suggesting that revenues will be lower than this quarter and about half of the year ago period. HTC is betting on China as a growth area, saying it has a “growing brand awareness, strong operator partnerships and increasing retail presence.”

Such optimism is valid as China is a country of opportunity for smartphones and tablet. The only problem for HTC? Its peers are betting on the same region for growth, so it needs to follow the One series with another smart, solid smartphone.

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