HTC has posted its Q2 numbers and they’re not pretty. While numbers were up on Q1, the Taiwanese handset maker saw declines in nearly every line of earnings compared to the same quarter a year ago. Revenues were 91.04 billion Taiwan dollars ($3 billion), down nearly 27% on Q2 2011; gross profit was down by more than 30% to NT24.59 billion ($819 million); operating profit down by over 57% to NT8.2 billion ($273 million). Earnings per share were also down by nearly 57% to NT8.9 ($0.30) per share.
The results show that despite gains in some key markets like China, HTC continues to see huge competitive pressure in the smartphone segment in which it competes. This year, in an effort to better focus the company, HTC launched a line of handsets under the brand “HTC One”, which followed a similar convention to Apple with its streamlined iPhone line-up.
HTC, like Samsung, makes smartphones based mainly on Google’s Android operating system, with a secondary line based on Microsoft’s Windows Phone OS. But despite being a very early mover in that space — it was Microsoft’s first handset partner for its smartphone forays, and Google’s first Android handset maker — HTC has not managed to hold on to its lead.
Unlike Samsung, HTC focuses only on smartphones (and, increasingly, a streamlined lineup of models). That means that HTC offers a less diversified range to the market, and that makes it more susceptible to feeling a pinch when its main/only line of business is not performing that well. While feature phones are getting gradually replaced by smartphones in the overall market, there is still a strong business to be had in the lower end models, as both Samsung and Nokia have shown. And it also provides a customer base loyal to a brand that can be tapped for upgrades. (Apple has been the one standout in the market that seems to have bucked this trend.)
HTC also provided a sober look at the quarter ahead. It expects that in Q3 revenues will drop even further to NT$70-80 billion ($2.3-2.7 billion), with the gross margin also dropping down to 25%, and the operating margin also coming down to 7%.
More to come. Refresh for updates.
