HTC Sees Revenue and Profit Beating Estimates as M8 Drives Sales

HTC Corp. forecast sales and profit above analyst estimates as demand for the Taiwanese smartphone maker’s marquee and mid-end devices helps revive sales.

Second-quarter net income will be NT$923 million ($31 million) to NT$3.46 billion with sales of as much as NT$70 billion, the Taoyuan, Taiwan-based company said in an exchange statement. The top of the earnings range would be the highest since 2012 and both projections exceed analyst estimates for profit of NT$577 million on sales of NT$57 billion.

HTC One M8, the latest version of its mainstay product, received positive reviews for its design and features after being released in March while the company also added more mid-priced devices to win sales in China. Supply and manufacturing problems faced by an earlier model last year were resolved, and HTC boosted production efficiency, Chief Executive Officer Peter Chou said in an interview last month.

“Although the driving force will mainly come from mid-range models, the flagship M8 has proved that, as far as technology ability is concerned, HTC is as good as other international big names,” said Sophia Chen, an analyst at Institute for Information Industry, a Taipei-based researcher. “This is helpful to restore consumers’ confidence in the company and can uphold the sales of HTC’s mid-range and value line products.”

Broader Range

The company expects sales to range from NT$65 billion to NT$70 billion, or 1 percent to 8 percent below the same period last year. Gross margin will be 21.3 percent to 22 percent, compared with estimates for 22.5 percent, while earnings-per-share will be NT$2.21 to NT$3 against expectations for NT$0.63.

HTC today reported April sales climbed 12.7 percent to NT$22.1 billion, the fastest growth since October 2011.

The company is planning a broader smartphone lineup to capture more of the middle market as it seeks to boost revenue from outside the One series of high-end devices.

“We intend to dominate the mid-tier. We believe we have the capability, the combination of factors in terms of what consumers need,” Chief Financial Officer Chang Chialin told an investors’ conference call today. “We also will, as you have seen in the market, participate in the affordable segment.”

Shares of HTC rose 3.6 percent to NT$175 in Taipei trading before the announcement, taking its advance for the year to 24 percent.

Analyst Ratings

HTC is rated sell by 21 of the 31 analysts tracked by Bloomberg. The stock has a hold rating at the other 10 brokers. None recommend buying the stock.

HTC has posted operating losses for three consecutive quarters as sliding sales failed to cover administrative and marketing expenses.

Chairman Cher Wang is said to have hired Paul Golden, former U.S. mobile marketing chief for Samsung Electronics Co., as a consultant and appointed Edward Wang as acting chief financial officer as Chang Chialin focuses on sales. Design chief Scott Croyle also quit recently after almost six years at HTC, according to two people familiar with the move.

Production efficiency, or the amount of devices suitable to be sold for each that enters production, climbed to 98 percent last month for the M8, compared with 70 percent a year earlier for the previous version, CEO Chou said in an April 8 interview.