HTC reports 79 percent fall in net profit in Q3

With smartphone companies turning up the heat in the race for market share, Taiwan-based HTC Corp’s strategy of reducing its number of models in the smartphone market and focusing on the mid- and high-end segments seems to be off the mark. The world's fifth-largest smartphone maker recently revealed to Reuters that its Q3 2012 net profit has fallen 79 percent, missing forecasts. This fall can mostly be attributed to its flagship phones failing to keep pace with Apple Inc's iPhone 5 and Samsung’s Galaxy range.

The company stated that its unaudited July-September net profit was NT$3.9 billion ($133.17 million), down from NT$18.68 billion in the same quarter last year, and NT$7.4 billion in Q2 2012. It did not elaborate. Earnings had been expected to drop to NT$5.57 billion, according to a Thomson Reuters I/B/E/S survey of 21 analysts. HTC's third-quarter revenue was NT$70.2 billion. The company said in August it expected its third-quarter revenue to be NT$70 billion to NT$80 billion, compared to NT$91 billion in the second quarter.

HTC losing profits as Samsung, Apple soar

The company enjoyed quite some success following the launch of some of its more successful Android-based smartphones. However, it has seen a slowdown in profits and sales since the second half of 2011. It stated in June this year that it would be completely moving out of the Brazilian market, laying off dozens of workers in the process. HTC has also stated that it would no longer be manufacturing low-end smartphones and instead would concentrate on catering to the medium and high-end smartphone segments. However, staunch competition coming in from the likes of Samsung Electronics and Apple Inc. have been proving deterrents to HTC's ambitions of making its presence felt in the medium and high-end smartphone segment. It was also reported in June that HTC has been losing its grip in the U.S. market and is attempting to gain popularity in markets like India and China.

Even as HTC is suffering from losses, Samsung Electronics reported a record quarterly profit of $7.3 billion late last week, nearly double last year's figure, thanks to strong sales of its Galaxy smartphones as well high-end TVs that offset weak semi-conductor sales.

"I expect HTC's margin was down 2 basis points compared to Q2 due to a change of product mix. HTC was cutting prices and its low-end phones were selling better," Yuanta Securities analyst Dennis Chan told Reuters. "The new models we saw in the past few weeks are not going to change the game. It will be able to keep its market share, but we won't see much pick-up," he said.

In the past few weeks, HTC has aggressively rolled out new models to regain market share in the fourth quarter. It released the "HTC J" targeted at the Japanese market last month, and the "HTC One X+," an upgraded version of its high-end flagship HTC One X. The HTC One X+ comes packed with hardware that can compete with the best in the business, or at least make the One X look early-2012. The design of both handsets is virtually the same. The highlighted feature of the One X+ is a quad-core 1.7 GHz quad-core Tegra 3 AP37 processor, which is faster than the quad-core 1.5 GHz CPU found on the One X. The One X+ is fitted with a 2,100mAh battery, which is larger than the 1,800mAh Lithium Polymer battery found on the handset’s predecessor. On the software front, the HTC One X+ comes with the handset with Android v4.1 (Jelly Bean) and laced with HTC Sense 4+ user interface (UI).

Last month, it also introduced two colourful models running Microsoft's Windows Phone 8 operating system, the Windows Phone 8X and the Windows Phone 8S, among the first in the market. The two smartphones will be competing with Microsoft’s partner Nokia, which also unveiled two phones based on Windows Phone 8 earlier this month.

(NT$ is the symbol for the Taiwan Dollar)