HTC, Still Struggling, Pins Turnaround On Cost Cutting And Sexier Devices

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Poor HTC. The Taiwanese firm just can’t seem to catch a break right now. Preliminary Q2 results in July predicted its business would return to the red, and, now those loses are confirmed with the quarter’s official figures, the company is preparing to “streamline” its business significantly and put out phones that people will actually want to buy.

The company recorded a NT$8 billion (US$252 million) operating loss for Q2 2015 on revenue of NT$33.0 billion (US$1,042 billion). In a frank call with analysts, HTC CFO and president of global sales Chialin Chang admitted that sales were weak because consumers “prefer more fashionable phones” to those which HTC offers. That’s not a huge surprise, as we, and others have said, its current flagship — the One M9 — is impressive but not particularly different to its predecessor, which didn’t sell well.

The company, which suffered last quarter with disappointing sales in China — where the smartphone market is shrinking and Huawei and Xiaomi’s affordable devices hoovering up marketshare — is planning to release new devices before the end of the year as it homes in on profitability rather than market share, Chang said.

HTC’s CFO confirmed that “a classic version” of the company’s flagship One M9 that’s more “trendy” is in the pipeline, alongside another model(s) with differentiated features. Don’t expect top-of-the-line releases, however. Chang said the new launches will “address premium segments” but will be a few tiers down from flagship. (That sounds to us like the Xiaomi-Huawei $300-500 range, but HTC isn’t giving more details for now.)

Of greater concern, Chang rather ominously told the earnings call that HTC will “optimize our operating experience and improve efficiency to save costs.” The measures will reduce operating expenses “quite significantly,” he added. That sounds like it could mean lay-offs, but that wasn’t explicitly communicated over the call so we’ll have to wait to hear more.

The third element to HTC’s planned turnaround, beyond cost cutting and new launches, is its non-smartphone business. The company, which invested $10 million in VR software outfit WEVR last week, is placing emphasis on virtual reality ahead of the planned launch of its Vive headset before the end of the year. To that end, the company touted its “first mover advantage” and that more than a thousand developers are working on content for its VR platform.

That’s coupled with wearables, an area where the company hasn’t got the best track record. HTC has postponed the launch of its Grip fitness tracker and it apparently abandoned a smartwatch plan last year. Chang said the company would release connected devices, and it will use a partner-based approach (the Grip is developed in collaboration with UnderArmor, and coming soon) to build that side of its business with greater efficiency.

Chang predicted that the results of HTC’s new strategy won’t be seen in its financial performance until early next year. For that reason, the firm didn’t provide estimates for profit/loss in the next quarter.

HTC is the latest in a line of Android phone makers to have reported less-than-impressive Q2 2015 financials. LG saw sales drop (although it did well in the U.S.), Samsung’s growth slump continued, and Sony’s mobile business turned in a poor scorecard, too. Unlike this trio, however, HTC doesn’t have other business units that can suck that poor mobile performance up and steer it to profit.