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HTC Earnings Miss Analyst Estimates on Lack of New Phones

HTC Corp. (2498), Asia’s second-largest smartphone maker, posted operating income that was lower than analysts’ estimates as a lack of new models prompted a loss of market share.

Fourth-quarter operating income was NT$600 million ($21 million), compared with the NT$1.11 billion average of 20 analyst estimates compiled by Bloomberg. Net income was NT$1 billion, the Taoyuan, Taiwan-based company said in a statement yesterday. That’s the lowest since 2004 and less than the NT$10.9 billion it posted a year earlier.

Apple Inc. (AAPL)’s iPhone 5 and new Galaxy models from Samsung Electronics Co. (005930) took market share away from HTC, which lacked new offerings for most of the quarter. HTC’s stock dropped 40 percent last year and the company replaced its chief marketing officer after its global share in smartphones dropped by more than half.

“HTC’s operating margin barely met expectations and December sales were below what many expected,” said Jeff Pu, a Taipei-based analyst at Fubon Financial Holding Co. in Taipei. “It’s due to non-operating items that net income was as high because some models were not selling as well in the U.S. and China.”

Revenue dropped 41 percent to NT$60 billion, compared with the NT$60.5 billion average of 23 analyst estimates. HTC on Oct. 26 forecast sales of about NT$60 billion, the lowest in 11 quarters.

Photographer: David Paul Morris/Bloomberg

The HTC Corp. 8X smartphone is displayed for a photograph. Close

The HTC Corp. 8X smartphone is displayed for a photograph.

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Photographer: David Paul Morris/Bloomberg

The HTC Corp. 8X smartphone is displayed for a photograph.

HTC fell 4 percent to close at NT$276.5, the biggest decline since Nov. 13. The Taiwan Taiex Index fell 0.4 percent.

Butterfly Sales

The company didn’t provide details of any non-operating income earned during the period in its statement yesterday.

“There were no strong products for HTC in the fourth quarter, so it will be the bottom of their sales and earnings,” Richard Ko, an analyst at KGI Securities Co. in Taipei who last week upgraded the stock to outperform from underperform, said before the announcement. “New products such as Butterfly should start to have an effect on their results this quarter.”

The company’s Butterfly J smartphone ranked 10th in Japan in the Dec. 17-23 sales period, CNA reported, citing researcher BCN. The company also is expected to release a new smartphone this quarter.

Apple Settlement

Chief Financial Officer Chang Chialin on Oct. 26 forecast an operating margin of 1 percent for the quarter, compared with 7 percent in the prior period, as lower sales cut profitability.

Two weeks after that outlook was given, the company announced it had settled all patent cases with Apple and agreed to a licensing deal. That pact wouldn’t have any adverse financial impact on the company, it said.

Photographer: Maurice Tsai/Bloomberg

Traffic moves past a billboard advertisement for HTC Corp.'s One X+ smartphone in Taipei, Taiwan. HTC’s share of the global smartphone market dropped to 4.6 percent in the third quarter from 10.3 percent a year earlier as Samsung’s lead widened. Close

Traffic moves past a billboard advertisement for HTC Corp.'s One X+ smartphone in... Read More

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Photographer: Maurice Tsai/Bloomberg

Traffic moves past a billboard advertisement for HTC Corp.'s One X+ smartphone in Taipei, Taiwan. HTC’s share of the global smartphone market dropped to 4.6 percent in the third quarter from 10.3 percent a year earlier as Samsung’s lead widened.

Pu, Ko and Macquarie Group Ltd.’s Daniel Chang upgraded the stock following settlement of the lawsuits, which had threatened shipments to the U.S.

HTC’s share of the global smartphone market dropped to 4.6 percent in the third quarter from 10.3 percent a year earlier as Samsung’s lead widened, according to data compiled by Bloomberg Industries. HTC’s share of the U.S. handset market fell to 3.6 percent from 11.6 percent, according to the data.

Net income will climb to NT$2.16 billion this quarter on sales of NT$61.8 billion, according to analysts’ estimates. HTC will hold a conference call later this month to discuss fourth- quarter earnings and the first-quarter outlook.

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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