HTC Corp. (2498), the largest seller of smartphones in the U.S., cut revenue forecast as much as 23 percent as the global economic crisis and rising competition from Apple Inc. (AAPL) and Samsung Electronics Co. (005930) dent demand.
Fourth-quarter revenue will be approximately the same as a year earlier, when it was NT$104 billion ($3.4 billion), the Taoyuan, Taiwan-based company said in an exchange statement today. Last month, HTC forecast sales to range between NT$125 billion and NT$135 billion. Sales will slow quarter-on-quarter for the first time in almost two years.
A $300 million purchase of S3 Graphics Co. also will be reevaluated after the target company lost a patent-infringement case against the iPhone maker earlier this week, HTC said today. The announcement comes as HTC, which uses Microsoft Corp.’s Windows and Google Inc.’s Android software on its phones, took the lead in the U.S. smartphone market last quarter.
“Wow, it finally happened, the sales growth streak has come to an end,” said Bonnie Chang, who rates HTC “hold” at Yuanta Securities Co. in Taipei and may amend her recommendation after the forecast cut. “HTC doesn’t have the same sparkle, lacking both the design and marketing of Samsung, while they’ve declined to go into the low-end phones which are popular in China.”
The average of 23 analyst estimates compiled by Bloomberg is for fourth-quarter revenue of NT$136.7 billion. HTC has posted quarter-on-quarter sales growth each period since the three months ending March 31, 2010.
“Due to global macroeconomic downturn and market competition, the assumptions of 2011 Q4 financial forecast provided earlier are no longer applicable,” HTC said. Growth will return in the first half of next year, it said.
HTC Chief Financial Officer Winston Yung didn’t answer calls to his office and mobile phones after office hours today.
HTC plans to boost revenue in emerging markets on demand from China, Latin America and Indonesia, Chief Executive Officer Peter Chou said Nov. 7. Sales in China will climb five-fold from last year, he said.
The loss in a patent-infringement case the company brought against Cupertino, California-based Apple at the U.S. International Trade Commission prompted the reevaluation of the S3 Graphics purchase, HTC said in a separate statement today. HTC announced its intention to buy the maker of image- compression technology a week after S3 Graphics won an earlier ruling at the ITC.
S3 Graphics, based in Fremont, California, is owned by HTC chairwoman Cher Wang and VIA Technologies Inc., a Taiwan chipmaker whose board she also chairs.
The decision to reassess the acquisition is “good news” because the loss at the ITC casts doubt on the value of the deal, Yuanta’s Chang said.
HTC shares dropped 5.8 percent to NT$565 at the close of trading in Taipei before today’s announcement, the lowest level since September 2010, extending losses to 34 percent for the year.
To contact the reporter on this story: Tim Culpan in Taipei at firstname.lastname@example.org.