HTC Slumps After Forecasting Sales Drop: Taipei Mover

HTC Corp., Taiwan’s biggest smartphone maker, slumped to its lowest in almost eight years in Taipei trading after forecasting an eighth consecutive decline in quarterly sales amid intensifying competition.

The stock dropped 6.7 percent to NT$159.50 as of the close of trade, the lowest level since November 2005. Revenue will be as much as NT$60 billion ($2 billion) in the three months ending September, the Taoyuan, Taiwan-based company said in a statement yesterday. That missed the NT$72.7 billion average of 21 analysts’ estimates compiled by Bloomberg.

HTC may post a loss in the quarter, its first on a consolidated basis since at least 2008, as its flagship One handset fails to arrest a slide in sales. The smartphone maker, which didn’t figure among the top five global producers in the second quarter, plans to boost promotion and introduce mid-range products to revive growth.

“While management expects this to be the trough, we do not see any sign of a turnaround,” Laura Chen, an analyst at BNP Paribas SA, wrote in a note to clients. “We forecast a sluggish outlook for HTC given high-end market saturation and fierce competition in the lower-end,” said Chen, who has a reduce rating on the stock.

HTC forecast third-quarter operating margin to be in the range of nil to negative 8 percent. If it posts a negative operating margin, it will be the first time since at least 2008 on a consolidated basis, according to data compiled by Bloomberg.

New Products

Gross profit margin is forecast to be in the range of 18 percent to 21 percent, HTC said in the statement. That compares with the 23.7 percent average of 18 analysts’ estimates compiled by Bloomberg.

“While we have been concerned about HTC’s profitability, we still underestimated how fast it erodes,” Pauline Chen, an analyst at Credit Suisse Group AG, said in a report as she cut the stock to underperform.

The company introduced the HTC One in the U.S. in April, the same month Samsung Electronics Co. put its flagship Galaxy S4 on sale. HTC strengthened promotions of its HTC One brand and will offer mid-range products as early as end of this quarter, Chou said, without elaborating. The company also plans a smaller version of its flagship handset.

“We are planning to have a new range of products, trying to stay competitive in the market,” Chief Executive Officer Peter Chou said in a conference call yesterday. “We expect HTC One mini will do quite well.”

Global smartphone shipments increased to 230 million in the second quarter, Boston-based Strategy Analytics said last week. While IDC said sales of smartphone rose at the fastest pace in five quarters. HTC didn’t figure in the top five smartphone makers in either of the two rankings by market share.

HTC lost the early momentum of unveiling its HTC One in February prior to Samsung’s Galaxy S4 as a shortage of camera components forced it to delay shipments.

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