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October 29, 2012

HTC Expects a Fall In Revenue in Its Fourth Quarter

By Shankar Pandiath, TMCnet Contributor

HTC (News - Alert) Corp (2498.TW), the Taiwanese smartphone maker said on Friday (October, 26, 2012) that it is expecting a fall of about 14.5 percent in its fourth quarter. It also expected its operating margin to decline significantly to about 1 percent in the last quarter.

According to a poll by 23 analysts by Reuters (News - Alert), HTC was expecting to earn about $2.53 billion as the Fourth-Quarter revenue. In a statement HTC corrected its expectations and is now expecting its Fourth-Quarter revenue to be about $2.05 billion. It managed about $2.40 billion in the Third-Quarter.

HTC is expecting a gross margin of around 23 percent and an operating margin of 1 percent in the fourth quarter which is lesser than the numbers of Third Quarter when HTC managed 25 percent of gross margin and seven percent of operating margin.

The former contract maker has been suffering a sharp decline in its fortunes since the second half of 2011 following a fairytale ride from contract manufacturer to strong global brand with phones based on Google (News - Alert) Inc's Android software.

Nomura Securities analyst Aaron Jeng spoke before making the announcement that he has seen worse shipments in Q4 because there's nothing exciting about HTC's new models.

In the past few weeks, HTC has aggressively rolled out new models to regain market share. 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 model, both running on Google's operating system

HTC’s flagship phones were unable to keep pace with Samsung Electronics Co. Ltd.’s Galaxy range and Apple Inc’s iPhone. HTC had reported earlier that its Third-Quarter net profit had fallen to almost 79 percent. Taiwanese smartphone maker currently is struggling and has been finding it hard to emulate the success of its rivals. Rivals Apple (AAPL) and Samsung (005930.SE) have posted rises in their profits.

HTC's tough business conditions show just how quickly a company's fortunes can change in the rapidly evolving market for smartphones. HTC, which was Apple's strongest smartphone competitor in the U.S. just two years ago, has since lost much of its global market share to South Korea's Samsung, the world's largest smartphone vendor.

HTC had embraced Google’s Android operating system quickly and was an early success story. It began to show cracks about a year ago, in subsequent quarters there was further decline. However it is trying to get back into the markets. HTC has now been focusing on fewer, higher-quality devices.

HTC has also embraced Microsoft's (News - Alert) Windows Phone operating system besides android. HTC has upgraded its HTC One flagship phone and has introduced two new models running Microsoft's Windows Phone (News - Alert) 8 software.

Edited by Rich Steeves
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