Six quarters have came and went, and in each one Taiwan's HTC has seen its once rising star turn into a financial failure. But this most recent one was arguably as bad as any as the Android smartphone maker's unaudited Q1 2013 earnings have badly missed on analyst earnings expectations.
A survey of 19 analysts by Bloomberg had predicted a net profit of NT$600M ($19.97M USD). A separate survey of 16 analysts by UK-based Financial Times, a Pearson PLC unit, predicted a slightly leaner NT$287M ($9.56M USD). Instead, HTC managed to miss both targets, essentially breaking even for the quarter with a net earnings of NT$85M ($2.83M USD).
Revenue fell to a new low of NT$42.8B ($1.42B USD), versus a Bloomberg analyst prediction of NT$54.7B ($1.82B USD) or a Financial Times analyst prediction of NT$53.8B ($1.79B USD).
Worse yet, the operating margin -- a measure of profitability -- was around 0.1 percent, less than the 0.5-1 percent HTC had forecasted. To put that in perspective, Samsung has a margin of 14.4 percent; while Apple has an industry-leading operating margin of around 33.46 percent.
More Trouble Ahead
HTC is slowly ramping up HTC One production and sales this month. However, that leaves it with a far leaner window to market before Samsung's hot Galaxy S IV than it anticipated. The Galaxy S IV launches on April 26.
Taipei, Taiwan-based Yuanta Securities warns that the dire Q1 2013 financials may only be a precursor to the Q2 2013 bloodbath, saying that the HTC One shipping delays will cost the phonemaker. Yuanta analyst Dennis Cheng comments to Bloomberg, "These numbers show the production shortage really is that bad, and my sense is that it won’t get much better in the second quarter because many of those issues continue. For smartphones, timing is everything and the delay means they lose that timing."
Sources close to the company have said that HTC's embattled long-time CEO Peter Chou had told employees late last year that he would step down if the HTC One did not reverse his struggling firm's fortunes.
Briefly the largest U.S. phonemaker in late 2011, HTC today is no longer even the second largest Android phonemaker, passed by China's ZTE and Huawei.
Aside from shipping delays one under-examined factor in HTC's decline is the cost of the "patent tax" paid to Microsoft and Apple. While HTC did brag about getting a "bargain" from Apple in terms of patent licensing, and it at least no longer has to worry about bans, it reportedly must pay $10 USD per device to Microsoft and around $5 USD to Apple per device. That's far from HTC's only problem, but paying licensing fees is one more factor battering the phonemaker's margins.