After $102M Loss In Q3, HTC To Slash Operating Costs By 24%, Focus On Selling Cheaper Handsets

Struggling Taiwanese mobile maker HTC is planning to slash costs by nearly a quarter and sell cheaper handsets in the hopes of turning a profit in its Q4, it said in an investor call today (via Reuters). It also confirmed its Q3 net loss: this stands at NT$3 billion ($102 million), up slightly on the preliminary figure of NT$2.97 billion it released in October.

HTC’s Q3 results represent its first ever quarterly loss — which, while notable for such a veteran smartphone maker, came as little surprise after more than a year of sliding sales.

In its Q4 last year the company reported a 91% year-on-year drop. In its Q4 outlook today, HTC said it expects revenue to be in the range of NT$40 billion to NT$45 billion (vs NT$60 billion in the year ago quarter).

HTC added that expects its Q4 gross profit margin to be 20% +/- 1%, with EPS in the range of just NT$0.1 to NT$1.7. It did not give a prediction on whether the quarter would swing back to profit or chalk up another loss but with EPS so low there’s precious little room for manoeuvre. And being forced to slash costs in the hopes of eking out a quarterly profit means HTC will have less road to perform the required business turnaround.

HTC has been slammed by competing in a space dominated by rival Android OEM Samsung. Samsung’s strategy of flooding the market with handsets at every price point, from budget to flagship, has starved out rivals — leaving HTC (and others) with fewer resources at their disposal to fight back. In HTC’s case a smaller portfolio has led to less marketshare and sliding profits — with the company finally tipping into the red last quarter.

According to Reuters, HTC said it intends to keep its operating expenses low in October to December — at around T$10 billion, which is 24% below the previous quarter’s T$13.1 billion. The company did not specify where savings would be made but it did say it plans to broaden its product portfolio, going after volume sales of more affordable handsets.

“We’re looking at broader products in this quarter… we aim for higher volume into 2014 that will give better profitability,” company financial chief Chialin Chang said in the briefing, according to Reuters.

In recent times HTC has been mostly focused on flagship handsets such as the HTC One and HTC One Max. Expensive to buy, and expensive to produce. Yet growth in smartphones is largely coming from emerging nations buying more affordable handsets — so HTC switching its focus to make cheaper devices is finally in step with wider industry trends.

It remains to be seen whether HTC can pull off this shift in time to rack up the volumes required to drive its business forward again.

“We have delivered good progress in the third quarter,” said Peter Chou, CEO of HTC, in a statement confirming its Q3 results. “with the introduction of HTC One Mini and One Max, we now have an HTC One for everyone. We have also launched the Here’s To Change global brand campaign, affirming our role as the change- maker challenging the status quo since the dawn of the mobile phone industry, as well as our mission of continuing to bring change into the hands of people around the world.”