The first financial quarter of HTC was already difficult, but many observers had hoped that the HTC One line of product (which is actually very good) would have lifted the company relatively quickly. Unfortunately, and as we expected, that is not the case. In the second quarter, HTC’s profits are down 60% to $247M, down from $585M for the same period last year. On the revenue side, things fell by about 25%, which shows how much profits have been pressured as of late.
HTC did warn about a soft quarter when it presented its Q1 results. However, this confirms what the more pessimistic analysts feared. While a gross margin of 25% isn’t catastrophic, it isn’t great either, given that competitors like Apple touch 42% (overall, and 59% on the iPhone). This means that Apple and Samsung have more money to pump back into R&D, industrial design and manufacturing. Over the longer term, this can have huge consequences on HTC’s business.
HTC’s third quarter is expected to be “soft” too, so investors will have to brace again in a few months. With the upcoming announcement of new Apple and Samsung handsets, HTC will face yet another wave of strong competitors. If you haven’t done so, check our review of the HTC One X to see what the fuss is about.
Do you think that HTC can turn the tide against Samsung and Apple?