Taoyuan, Taiwan – HTC
cited weakness in its U.S. sales as the primary reason for its first quarterly
decline in sales and net profits in fiscal 2011.
For the fourth
quarter ending Dec. 21, chief financial officer Winston Yung blamed declining
U.S. sales in the quarter to iPhone competition and lower than expected sales
of 4G LTE phones.
LTE handset sales didn’t fare as well as
expected, Yung said, because “we dropped the ball.” The handsets’ form factor
and product design “could be better,” he said, pointing out that HTC’s phones
were thicker than competitors’ phones. LTE subscribers also have to make
“compromises” in battery life and form factor, but the industry will address
those challenges in 2012, and LTE phones “will be as attractive” as phones
using other technologies, he said.
improvements in LTE-phone battery life will remove the compromises that
consumers must make when buying LTE phones, he added.
triple-digit percentage gains in first- and second-quarter revenues and profits
and double-digit percentage gains in third-quarter revenues and profits, HTC
posted a fourth-quarter revenue, operating profit, and net profit declines.
revenues declined 2.5 percent year over year to NT$101.42 billion ($3.42
billion), net operating profits declined 22.9 percent to NT$12.89 billion ($435
million), and net income declined 26 percent to NT$10.94 billion $369 million).
For the full
fiscal year, revenues were up 67 percent to NT$465.79 billion ($15.7 billion),
and net profits were up 56.8 percent to NT$61.98 billion ($2.1 billion).
For the first quarter of 2012, the company
forecast revenues plunging by 32.8 percent to 37.6 percent to NT$65 billion to
NT$70 billion ($2.2 billion to $2.4 billion), with gross and operating margins
expected to be “low,” because the company’s product line is in transition,
which will also create price erosion, Yung said. Margins will return to normal
after a first-quarter product transition, Yung noted. “Despite short-term
difficulties, momentum will resume in the upcoming product cycle driven by
HTC’s brand strength, innovation, and design/engineering capabilities,” the
company added in a prepared statement.
Yung also forecast
that HTC will return to its previous level of sales in the U.S. because of a strong foundation that it built
based on brand, product innovation and engineering.
earlier statements from HTC that it would slow the pace of product
introductions to focus on fewer models, Yung said the change would not produce
a “dramatic reduction” in the number of product launches but would enable HTC
to provide a “more focused approach.” He mentioned that HTC will offer a “few
hero products” that it will “strongly support” with R&D and marketing to
ensure the company “is not outspent by our competitors,” he said.
HTC has offered
more products than competitors and as a result, the company has been outspent
in marketing on a per-product basis.
Longer term, the
company has begun making investments in smartphone marketing in developing
countries because those countries will
be taking a larger share of the global smartphone market in the coming years.
As for its Beats
audio subsidiary, Yung said the subsidiary is “performing financially very
well” and that operators have embraced the differentiation offered by HTC
handsets incorporating Beats audio technology. Beats technology “brings
immediate credibility,” he said.