HTC Plummets After Forecasting Narrowest Margin: Taipei Mover

HTC Corp. (2498), Asia’s second-largest smartphone maker, fell to the lowest level in almost seven years in Taipei trading after forecasting sales that missed analysts’ estimates and predicting its narrowest operating margin.

HTC dropped 7 percent, the daily limit, to NT$219.50 as of 10 a.m., headed for the lowest closing level since Dec. 15, 2005. The decline widened HTC’s stock-price loss to 56 percent this year, after a 42 percent drop in 2011.

Revenue this quarter will be about NT$60 billion ($2.1 billion), the Taoyuan, Taiwan-based company said Oct. 26 after the market’s close, less than the NT$74.6 billion average of 24 analyst estimates compiled by Bloomberg. Operating margin will be about 1 percent, HTC said. Provisions for old inventory, spending on marketing, and the introduction of new devices late in the quarter prompted the lower forecasts, the company said.

“We think it will be a challenge for HTC to turn around,” Laura Chen, a Taipei-based analyst at BNP Paribas SA, wrote in a note today. “We think HTC’s weak economies of scale and difficulty in product differentiation make the company’s recovery outlook look more remote.”

Chen cut her stock-price estimate by 55 percent to NT$100.

HTC’s third-quarter smartphone shipments fell 43 percent from a year earlier, the most among the top five vendors, even as the market climbed 45 percent, according to IDC Corp.

“While contribution from China rose to over 40% in 3Q12, it was not enough to offset weakness in U.S. and Europe,” according to Richard Ko and James Lin, Taipei-based analysts at KGI Securities Co. “Apple and Samsung are still way head in terms of brand, marketing and distribution channel.”

The revenue forecast would be HTC’s lowest revenue since the first quarter of 2010, according to data compiled by Bloomberg.

Among 35 analysts tracked by Bloomberg, 25 have the equivalent of a sell rating on HTC, eight recommend holding the shares, while two advise investors to buy.

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

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.

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