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HTC Profit Declines 70% After ‘Dropping the Ball’ on Phones

HTC Corp. (2498), Asia’s second-largest smartphone maker, posted its biggest drop in profit since listing a decade ago after sales declined amid competition from Apple Inc. and Samsung Electronics Co.

First-quarter net income was NT$4.46 billion ($151 million), the Taoyuan, Taiwan-based company said in a statement on its website today, a 70 percent drop from a year earlier. The average of 17 analysts’ estimates compiled by Bloomberg was for profit of NT$4.62 billion.

HTC “dropped the ball” on new products during the fourth quarter, Chief Financial Officer Winston Yung said in February, pushing inventories higher and prompting the company to forecast a “transitional” first quarter.

“HTC’s sales growth for 2Q12 from a low base should exceed those for major competitors Apple and Samsung,” Dale Gai, who rates the stock equal weight, the equivalent of hold, at Barclays Plc in Taipei, wrote in an April 3 report.

Revenue for the quarter dropped 35 percent to NT$67.8 billion, compared with the NT$71.1 billion average of 22 analysts’ estimates compiled by Bloomberg and HTC’s own February guidance of NT$65 billion to NT$70 billion.

“We simply dropped the ball on products in the fourth quarter,” Yung said in a Feb. 6 conference call, where he described the first quarter as a transitional period and forecast a sales decline. “The form factor could be better and the product design could be better. So we’ve learned lessons from the fourth quarter products.”

Photographer: Ashley Pon/Bloomberg

Visitors try out HTC Corp. mobile handset devices near an HTC Sensation XL, in foreground, at an HTC store in Taipei. Close

Visitors try out HTC Corp. mobile handset devices near an HTC Sensation XL, in... Read More

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Photographer: Ashley Pon/Bloomberg

Visitors try out HTC Corp. mobile handset devices near an HTC Sensation XL, in foreground, at an HTC store in Taipei.

HTC shares climbed 2.8 percent to close at NT$585 in Taipei, before the announcement.

HTC no longer provides shipment numbers, and is scheduled to update second-quarter guidance and discuss first-quarter results in a conference call to be held later this month.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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