HTC warns of first-ever operating loss

Taiwan-based smartphone maker HTC warns in its second quarter financial results that first-ever operating loss is likely in the third quarter

Taiwan-based smartphone maker HTC has warned in its second quarter financial results that it may make its first-ever operating loss in the third quarter.

The company’s share price dipped sharply with the news, falling 7% to a near eight-year low, according to the BBC. HTC shares have fallen 44% in the past year, currently trading at their lowest level since 2005.

In the company’s outlook for the third quarter, HTC said it expects its operating margin to fall to between zero and minus 8% on revenues $1.7bn to $2bn.

The forecast is below analysts’ predictions of a margin of 2-4% and revenues around $2.4bn.

“Our overall gross margin has been affected 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,” HTC said.

However, the company added that actions had been taken that were expected to bring an improvement in the fourth quarter.

HTC has lost market share to rivals such as Apple, Samsung, Huawei and ZTE and the company reported an 83% drop in net profit in the second quarter, compared with the same period a year ago.

HTC posted quarterly revenue of $2.4bn, with gross margin of 23.2% and operating margin of 1.5%. Net profit was $41.7m.

In an attempt to revive growth after seven consecutive quarters of declining sales, HTC has launched new products, including the HTC One.

The company said the HTC One has performed well and that it hopes to extend the momentum into the second half of 2013.

“With the help of HTC One, we have regained superphone market share across major markets including China,” the company said.

HTC said it had plans to launch a range of “innovative and competitive” mid-tier products in the coming months to regain market share.

“We are also optimising our organisation, including the improvement of management efficiency and effectiveness,” the company said.

However, some analysts have expressed doubt that HTC will be able to reverse its falling fortunes in the near-term.

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