HTC struggles to stay relevant as profits plunge

Alex Walls
February 5, 2013

HTC is seeing the squeeze from rivals such as Samsung with a 91% drop in profit for its fourth quarter.

The Taiwanese phone manufacturer reported its fourth quarter results for 2012, which saw net profit after tax drop of more than 90% from T$10.9 billion ( £233 million) T$1 billion from the year ago quarter.   This was also a drop from the third quarter 2011’s T$3.9 billion.

Revenue was down from the fourth quarter 2011’s T$101.4 billion to T$60 billion, and down from the third quarter’s T$70.2 billion.

The company was struggling to stay relevant, after much of its growth was based on being the Android handset of choice, Ovum principal analyst Adam Leach said.

Roughly 18 months ago, HTC had the best Android handsets on offer and as such, had good European and North American sales.   Since then, the company had been squeezed by Samsung pushing its Android line and the success of the Galaxy series had put pressure on HTC, which had struggled to come back with something competitive, Mr Leach said.

“They also have the issue of, if people aren’t buying Apple, they tend to be buying Samsung as they’re Android choice, so they’re at best third or fourth choice down the run of what consumers are choosing to buy.”

Come up with a competitive new handset, or go home

With rumours of a new HTC handset, the M7, to be launched this year, HTC may have an offering to get them back in the game.

Mr Leach said the smart phone market could be fickle; when it turned from a previously popular device, profits could fall quickly, such as with Motorola and its Razr handset.   While other manufacturers had more diverse product portfolios, such as Samsung’s TVs, tablets and PCs, which could help sustain companies when handsets didn’t sell, HTC’s entire business was smart phones.

“The trouble that HTC have is trying to come up with that hit device because that’s really what their business turns on. They are only in the smart phone business they don’t have any other business to lean on.”

Due to this lack of diversification, the only card HTC could play was to produce the most desirable Android smart phone out there, which was very difficult with competitors like Samsung and Apple.

“If they do that then we can see them returning to profitability.”

Settlement with Apple

HTC said in its results that it reached a global settlement regarding a patent suit with Apple in November, resulting in a ten-year licensing agreement which Apple said extended to current and future patents held by both parties, and the dismissal of all pending litigation

The quarter saw momentum in Japan and Taiwan markets, supported in part by the launch of the “lauded” HTC Butterfly, the company said.

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