HTC execs: Oh dear, did we say we'd sell lots of smartphones? Our bad

Revised guidance slashes sales forecast by nearly a third

The bottom appears to have dropped out of HTC smartphone sales, leaving the Taiwanese firm forced to revise its second-quarter earnings guidance downward by nearly 30 per cent.

Just over a month ago, HTC said it expected to see revenue of between NT$46bn and NT$51bn New Taiwanese dollars ($1.49bn to $1.66bn in US dollars) in the second quarter, and earnings of between NT$0.06 to NT$0.34.

On Friday, the electronics maker issued a bulletin featuring a dramatic adjustment of those figures. HTC now expects next quarter's revenue to come in at NT$33bn to NT$36bn ($1.07bn to $1.17bn in US dollars). And rather than earning a few pennies per share, it says it now expects to lose between NT$9.70 and NT$9.94 per share.

HTC has also revised its expected gross profit margin for the quarter downward, from 23–23.5 per cent to 19–19.5 per cent.

Not surprisingly, HTC blames "prevailing market conditions" for its predicament. But any way you slice it, its execs goofed – they were expecting to sell far more phones than they actually have in the two months of the quarter that have passed so far.

Specifically, the revised guidance is down to "slower demand for high-end Android devices" like the recently launched HTC One M9, the company said.

Another problem: China. HTC hasn't done as well as it expected to in the Middle Kingdom, where the smartphone market appears to be heating up into a battle between Apple, Samsung, and Chinese upstart Xiaomi.

Increased competition has also meant HTC has had to up its spending on marketing and product promotion, although the firm says it's trying to improve operating efficiency there and elsewhere.

HTC says it has done a thorough review of all of its properties and has identified a few "idled assets and prepaid expenses" that it has chosen to write down in the second quarter, which it expects to result in a one-time impairment charge of NT$2.9bn ($90m US).

The company says it has a four-pronged plan to reverse its flagging fortunes. First, it plans to make its smartphone business more competitive in unnamed ways. Second, it plans to cut costs and tighten its belt. Third, it plans to improve business processes and streamline its organization.

Finally, HTC says it now plans to "aggressively develop new business opportunities beyond smartphones." Sounds like it's about time. ®

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