HTC 2Q Profit Falls as Smartphone Competition Intensifies
07/06/2012| 06:13am US/Eastern
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-- HTC's second-quarter net profit falls 58% from a year earlier due to slowing global economy and intense competition
-- Uncertainties over global economy and intensifying competition remain an overhang, analysts say
-- HTC's third-quarter outlook is cloudy as competitors are launching more new models, analysts say
(Adds background on smartphone market in 3rd paragraph, Samsung earnings guidance in 4th paragraph, analyst comment in 6th paragraph.)
By Lorraine Luk
TAIPEI--HTC Corp. (>> HTC Corp) said Friday its unaudited second-quarter net profit fell 58% from a year earlier, as the Taiwanese smartphone maker continues to struggle in its battle against industry leaders Apple Inc. (>> Apple Inc.) and Samsung Electronics Co. (>> Samsung Electronics Co., Ltd.).
HTC said in a statement its unaudited net profit for the three months ended June 30 was $7.40 billion New Taiwan dollars ($247 million), down from NT$17.52 billion a year earlier. Its revenue dropped 27% to NT$91.0 billion from NT$124.40 billion.
In the rapidly evolving market for smartphones, HTC has been losing ground against Apple and Samsung. In the U.S., HTC's smartphones, which run on Google Inc.'s (>> Google Inc) Android operating system, were the strongest competitors against Apple's iPhone in 2010, when many mobile users were still replacing their traditional cellphones with smartphones. But fast-rising Samsung last year overtook HTC in the U.S. market to become the biggest vendor of Android-based smartphones.
In stark contrast to HTC's weak earnings, Samsung said earlier Friday that it will likely post a record quarterly operating profit for the second quarter that ended June 30. The South Korean electronics giant, which is due to release audited results later this month, expects an operating profit of between 6.5 trillion won ($5.7 billion) and KRW6.9 trillion for the quarter, compared with KRW3.75 trillion a year earlier.
Analysts said HTC's business outlook is increasingly tough amid intensifying competition and uncertainties over the global economy.
"HTC's third-quarter outlook is dim as competition is still fierce, with new smartphones from Samsung and Apple," said Yuanta analyst Dennis Chan.
Samsung launched its new flagship smartphone, the Galaxy S III, in Europe in May. Apple is expected to launch its next-generation iPhone later this year.
Mr. Chan said he expects HTC's third-quarter revenue to be about the same as the second-quarter figure.
HTC's weakening position in the U.S. is forcing the company to rethink its strategy and focus more on other markets.
HTC doesn't disclose its geographical revenue breakdown, but analysts said the U.S. likely accounted for about half of the company's revenue and about 40% of its total smart phone shipments last year.
While the company has been turning to Asia and other emerging markets for growth, competition is also intensifying in those markets.
In China, the world's biggest smartphone market, HTC will likely face more competition from local handset makers such as ZTE Corp. (>> ZTE Corporation) and Huawei Technologies Co. Huawei and ZTE, which have been strong in the low-end segment, are trying to sell more high-end models.
Write to Lorraine Luk at lorraine.luk@dowjones.com
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