HTC Falls as Outlook Shows Weak ‘One’ Phone Profit: Taipei Mover

HTC Corp. (2498) dropped the most in almost two months in Taipei trading after forecasting margins for this quarter that missed analyst estimates, an indication its One handset may not be enough to restore earnings growth.

HTC slid 5.3 percent in Taipei trading, the most since March 6, to close at NT$279.50. The stock has lost 7 percent this year, compared with a 5.7 percent gain for the benchmark Taiex (TWSE) index.

Second-quarter gross margin will be 22 percent to 24 percent, HTC said yesterday, missing the 24.6 percent average of 19 analyst estimates compiled by Bloomberg. Its operating margin forecast was about half the average of estimates. HTC One, released in the U.S. in April, marks a “watershed moment” for the handset maker after six quarters of declining market share, Chief Executive Officer Peter Chou said in an April interview.

“Making a comeback is very challenging, despite continued excellent execution in terms of products,” Pierre Ferragu, who rates the stock neutral at Sanford C. Bernstein Ltd. in London, wrote in a report today. “Following the second-quarter guidance, we believe expectations will revise significantly downwards and calm down expectations for a turnaround.”

Taoyuan, Taiwan-based HTC projected second-quarter sales of NT$70 billion, in line with the NT$69.7 billion average of 20 analyst estimates and 23 percent less than a year earlier.

Operating margin will be 1 percent to 3 percent, implying an expectation for operating profit of NT$700 million to NT$2.1 billion, compared with the NT$3.69 billion average of 18 analyst estimates.

Phone Delay

Gross margin was 20.3 percent in the first quarter and operating margin was 0.1 percent, the company said.

Smaller-than-expected manufacturing capacity for the HTC One’s camera caused a delay in shipments, Benjamin Ho, the company’s marketing chief, said March 25.

The supplier situation has “greatly improved,” while margins may rise in the third quarter, Chou said during a call with investors yesterday.

HTC’s stock lost 40 percent last year and dropped 42 percent in 2011 after surging 158 percent in 2010.

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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