HTC’s Hardship Continues As It Predicts Operating Loss In Q3

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No surprise: HTC’s run of declining quarters is predicted to continue. But the dip now looks set to push into the red in Q3. The Android mobile maker has just issued guidance for Q3, warning investors it’s expecting a loss of between 0 percent and -8 percent in the coming quarter. Its Q3 revenue is expected to be in the range of NT$50 billion ($1.7 billion) to NT$60 billion ($2 billion).

Despite what has the potential to be an extremely bruising coming quarter, if the loss is at the larger end of that bracket, HTC said it is hoping to see “improvements” in Q4, pointing to its plans to launch a range of mid-tier products “in the coming months.” The Taiwanese mobile maker is banking on bulking out its mid-tier to improve its ability to compete with the extensive device portfolio of Android behemoth Samsung.

“Our overall gross margin has been impacted by the relatively higher cost structure, lack of economy of scale and certain provisions needed to facilitate the clearance of aging products in the channel. Actions have been taken and we expect to see improvement in Q4,” HTC said in its guidance. “We are also optimizing our organization, including the improvement of management efficiency and effectiveness.”

Senior management changes have been an ongoing story at HTC this year. It has also been working to refresh its marketing strategy in a bid to ensure its less numerous — but well-reviewed – devices aren’t drowned out by the noise of Samsung’s well-oiled marketing machine, as well as the sheer volume of devices coming out of Korea.

HTC said its current flagship, the HTC One, has performed “well” — quantifying this as “better than that of our hero products for the same period last year.” It’s not breaking out specific device sales, however.

The company is continuing to follow Samsung’s playbook of iterating successful flagships by lining up a smaller and more affordable HTC One Mini to try to expand the momentum around the HTC One.

“We aim to extend the momentum as we enter into the second half of 2013. The new HTC One has also helped the company establish strong brand awareness and received numerous accolades as the world’s best smartphone. With the help of HTC One, we have regained superphone market share across major markets including China,” it notes.

“My leadership team continues to focus on execution,” added CEO Peter Chou in a statement. “We are seeing expected results as we fill the channels and meet demand for the new HTC One. As we broaden our focus to include a new member of the HTC One family, the recently announced One mini, we are looking forward to delivering great products and results in 2H.”

HTC also confirmed its Q2 results, following earlier unaudited reporting of the quarter, posting quarterly revenue of NT$70.7 billion ($2.35 billion), with gross margin of 23.2 percent and operating margin of 1.5 percent. Net profit and EPS were NT$1.25 billion ($41.63 million) and NT$1.50, respectively.