Taiwan's HTC posts first-quarter loss on weak flagshipphone sales

By Michael Gold

TAIPEI Mon Apr 7, 2014 6:12am EDT

HTC CEO Peter Chou shows the new HTC One M8 phone during a launch event in New York March25, 2014.

Credit: Reuters/Brendan McDermid

TAIPEI (Reuters) - Taiwanese smartphone maker HTC Corp posted a first-quarter loss that waswider than analyst estimates, after ineffective marketing resulted in weak sales of its former flagshipmodel.

The HTC One spent its year at the top of the product line receiving rave reviews but wasundermined by advertising widely criticized as confusing, sending the company's market share intofreefall.

HTC was once a firm third to Apple Inc and Samsung Electronics Co Ltd, selling 10 percent ofsmartphones globally two years ago, but it ended 2013 with a market share of just 2 percent,showed data from researcher Strategy Analytics.

The company started 2014 by booking a net loss of T$1.88 billion ($62.06 million) for January-

March. That compared with a mean loss of T$1.59 billion estimated by 18 analysts polled by Reuters,and profit of T$85 million logged a year earlier.

Revenue fell 22.6 percent to T$33.12 billion, the company said in a statement on Monday.

HTC, however, broke 28 months of on-year revenue declines with a rise of 2.16 percent in March,and said it expected to return to profit in the second quarter thanks in part to the late-March releaseof its upgraded flagship, the HTC One M8.

Shares of HTC have fallen 38 percent over the past year, compared with a 12 percent rise in theTaiwan Stock Exchange Weighted Index. Ahead of the release, they closed up 3.6 percent versus thebenchmark's 0.1 percent loss.

MARKETING

The former contract manufacturer released a series of mid-range smartphones in recent weeks,predicting cheaper phones in emerging markets will help it return to profit this year.

It has also launched a partnership with search engine giant Google Inc to manufacture smartwatches.

But it is the new flagship HTC One M8 that the company hopes will help it reestablish itself as achallenger to market leaders Apple and Samsung.

"The M8 is good, but it's not as revolutionary as the previous flagship," said Yuanta Securitiesanalyst Dennis Chan. "Everyone is watching the second quarter to see how it sells."

Tech website CNET.com awarded the phone four and a half stars out of five, calling it "a stunningsequel" to last year's HTC One - a phone whose equally strong reviews were not matched bymarketing and so did not translate into strong sales.

The new flagship could be in for a similarly rough sales ride as smartphone growth globally is likelyto slow this year to 19 percent from 39 percent in 2013, and taper off over the next few years,showed data from researcher IDC.

As smartphones mature and technological upgrades become more incremental, analysts say evenmore importance will be placed on marketing and brand image - an area Chairwoman Cher Wangadmitted HTC "didn't do well" last year.

To distinguish itself to trend-conscious consumers, HTC must learn from Apple, whose innovativebrand image and marketing strategy has won plaudits, said Taipei-based brand consultant MarkStocker.

"Mimic them, but figure out what your brand stands for," said Stocker. "If Apple is Mercedes Benz,try to make yourself BMW."

(Reporting by Michael Gold; Editing by Christopher Cushing)

Link this

Share this

Digg this

Email

Print

Reprints