HTC Posts Second Loss in Three Quarters Ahead of M8 Phone

HTC Corp. (2498) posted its second loss in three quarters after sales at the Taiwanese maker of smartphones slowed ahead of the release of a new version of its mainstay One device.

The first-quarter loss was NT$1.88 billion ($62 million), the Taoyuan, Taiwan-based company said in a statement yesterday. That compares with the NT$1.71 billion average loss of 13 analyst estimates compiled by Bloomberg. HTC on Feb. 10 forecast a loss of NT$860 million to NT$3.11 billion.

HTC released its One M8 phone on March 25 as part of the company’s efforts to turn around more than two years of declining sales amid a shrinking marketing budget and stiffer competition from Lenovo Group Ltd. and ZTE Corp. Revenue and profitability will improve this year as it offers a larger array of mid-priced phones to appeal to more customers, Chief Financial Officer Chang Chialin told investors in February.

“New products only came out in March and sales appear to be weaker than even HTC expected,” said Calvin Huang, an analyst at SinoPac Financial Holdings Co. in Taipei, who recommends selling the stock. “We need to wait until May to see whether sales throughput for M8 is as strong as they hope.”

Revenue for the quarter fell to NT$33.1 billion from NT$42.8 billion a year earlier. The average of 19 analyst estimates compiled by Bloomberg was for sales of NT$35.4 billion, while HTC had forecast a figure of NT$34 billion to NT$36 billion.

Photographer: Lam Yik Fei/Bloomberg

HTC Corp. signage is displayed at one of the company's stores in Taipei, Taiwan. Close

HTC Corp. signage is displayed at one of the company's stores in Taipei, Taiwan.

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Photographer: Lam Yik Fei/Bloomberg

HTC Corp. signage is displayed at one of the company's stores in Taipei, Taiwan.

‘Positive Trajectory’

HTC fell 2.5 percent to NT$155.50 at the close of trading in Taipei. The stock has gained 10 percent this year, outpacing a 3.2 percent advance in Taiwan’s benchmark Taiex index.

An operating loss of NT$2.05 billion was its third in a row and was wider than the NT$1.94 billion average estimate. HTC had forecast an operating loss of NT$1.78 billion to NT$2.19 billion.

“The company expects to see positive trajectory of its revenue in April from March and forecasts quarter-on-quarter revenue growth in the second quarter,” HTC said in the statement yesterday. Sales will be driven by demand for its new products, including the M8 and mid-tier Desire 816, the company said.

The HTC One M8 features a 5-inch (13-centimeter) high-definition screen, Qualcomm Inc.’s Snapdragon 801 processor and a micro SD slot, it said at release events in New York and London. The phone’s physical design mirrors that of last year’s HTC One model, which suffered production delays and a shortage of components.

Source: HTC Corp. via Bloomberg

HTC released its One M8 handset on March 25. Close

HTC released its One M8 handset on March 25.

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Source: HTC Corp. via Bloomberg

HTC released its One M8 handset on March 25.

Revenue Estimates

While net and operating income are both expected to return to profit in the second quarter, revenue will still be 20 percent lower than a year earlier at NT$56.5 billion, according to analyst estimates compiled by Bloomberg.

March sales climbed 2.2 percent to NT$16.2 billion, the first increase in monthly revenue since October 2011.

“The important thing to watch will be whether they can sustain sales into the third month after M8’s product release,” Birdy Lu, who rates the stock hold at Deutsche Bank AG in Taipei, said before the announcement.

HTC said it will hold an earnings call in early May.

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

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Aaron Clark, Terje Langeland

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