HTC’s financial woes for the past 18 months continued as the company announced quarterly results on Thursday. Smartphone sales have been down for some time but the company managed to rake in NT$42.8 billion (US $1.45B). Unfortunately, operating margin was a scant 0.1 percent with overall first quarter profits of NT$85 million (U.S. $2.88M).
It certainly didn’t help this quarter that HTC had to delay its new HTC One launch by a few weeks. The flagship smartphone has outstanding design and performance; it will surely help HTC this quarter once the global sales channels have inventory to sell. But I recently noted that HTC’s problems run much deeper than just an HTC One handset delay.
The company — once the biggest up-and-coming Android phone manufacturer — has watched itself be overtaken by Samsung, ZTE and Huawei, to name a few.
Brand awareness and a relative lack of marketing haven’t helped. Neither has money spent on poor decisions: The investment in Beats Audio hasn’t proven to be that helpful and efforts to create a small Android tablet — before such devices were truly popular — didn’t pan out either. And I’m not yet sold on the HTC First, a Facebook-centric handset, on helping the company stand out from the crowd.
For all of its struggles, HTC still has a positive outlook for next quarter; mainly due to the HTC One. The company expects a huge bump in revenues: NT$70 billion. Gross margin should be between 22 and 24 percent — up from the 20.3 percent of the most recent quarter — and operating margins are expected in the 1 to 3 percent range.
If I were HTC, I’d take as much of the profits as possible and dump them into marketing its latest handset. What good is a winning device if people are surrounded by ads from Samsung, Apple and others?