HTC now expects to lose money in Q2, writes off $93 million due to unused production capacity

by: Bogdan PetrovanJune 5, 2015

htc one m9 88

The price of HTC shares has been sliding ever since early March, when the Taiwanese company unveiled the One M9 to frosty reception. Today, HTC shares hit a new low after the company announced it expects a loss for the quarter ending this month, due to lower than expected sales and a one-time write-off of “idled assets.”

HTC now expects to record a net loss of TW$7.95 billion ($257 million) to TW$9.05 billion ($291 million) for the quarter ending June 30. Revenue is expected to be in the range of TW$33 billion to TW$36 billion. That compares to TW$41.5 billion revenue for the previous quarter.

HTC’s revised prediction for this quarter is 30 percent lower than the previous estimate. The phone maker blamed poor sales and intense competition for this dramatic cut.

The change for revenue outlook is due to slower demand for high-end Android devices, and weaker than forecast sales in China, while gross margin is revised primarily on product mix change and lowered scale. At the same time, increased competition has raised operating costs for product promotion; HTC is enacting measures to further improve operating efficiency.

The poor performance of the One M9 is probably the main reason HTC is doing so bad, even if the company didn’t acknowledge it. HTC said, however, that it would incur a “one-off impairment of NT$2.9bn for idled assets and some prepaid expenses.” In plain English, that means HTC booked more production capacity than it needed, and when demand for its products failed to materialize, it had to foot the bill. This meshes with the report from Taiwanese media claiming HTC cancelled 30 percent of the One M9 production due to lack of consumer interest.

For May 2015, HTC announced revenue of TW$10.79 billion, much lower than the $13.5 billion from April, which was the company’s worst April in six years. And this is just one month after the launch of the One M9.

HTC is trying hard to divert attention from the disaster that the One M9 shapes up to be. The company has launched three high-end phones (all three arguably better than the M9) in China and India in the past weeks. And just yesterday, CEO Cher Wang promised a new “hero” product coming out in October, and significant improvements for the next generation of the M series. Problem is, how much can HTC go at this rate?

  • averymlewis

    Hmmmm…. I seen this coming a MILE away…

  • Mike Bastable

    Unfortunately Bogdan failed to praise Samsung in his post. Please read randomn other article to correct this oversight.

    • Sorry man, I’ve been called a fan/hater of Samsung (and other companies) too many times to feel hurt by this. I assume that you’re talking about the S6 ads article. I am waiting to tell me how I was partial to Samsung. Thanks for reading!

      • Mike Bastable

        The word “Bogdan” could be replaced by “Android Authority”, nothing personal and certainly not intended to hurt. Just noticing a renewed Samsung love period from AA (sadly), AA is always better when it has news to report and does not waste our time with silly articles talking about Ads.

    • Cool

      Or just wait for Richard Yarrell to show up. The ultimate Samsung cheerleader.

      In fact I’m surprised he hasn’t showed up yet. He must be off his game.

      • Mike Bastable

        aaaaaah, Richard!, love him, bet he is fun at parties.

        • Cool

          Yes. He’s fun all right.

          Fun for pin the tail on the jackass. Haha.

  • averymlewis

    I’m a fan of the Hero line maybe it’ll change my mind about getting the Note 5………………..Nahhhhhh!!!

  • Sonik

    I really don’t want to see HTC go under. I’ve been a fan of their phones for many years. But the M9 was a massive disappointment. They had a good phone with the M8 and I think they were scared to change too much and also wanted to save money. I really hope they up their game and stop releasing phones exclusively to China/Asia which are better than the flagship! That’s a weird strategy.

  • nyc_rock

    Amazing how HTC did so much to get positive momentum and then threw it all away with the M9. Its a shame really.

    • Милен Стефанов

      Since when 2, maximum 3% profit is called “positive momentum”?

      • Austin2222

        It’s pretty darn good considering the amount of money they were losing before.

  • Kwadwo Boadu

    On the one hand the One M9 is really not the “utterly poor” device people make it out to be, and because enough people have said that it is it’s been taken as just a given. But on the other hand, the competition really stepped up their game and with their marketing and already more substantial marketing were able to take more away from the little user base HTC had. They were unable to convince enough people who owned the One M7 to upgrade to the M9 and people who own the One M8 and are not on contract were not convinced by the One M9. The competition for market share and sales is probably more fierce in China and Asia in general and they were unable to be convincing there too! Hindsight is a beautiful thing but they obviously overestimated how the One M9 and other devices would perform in the first half of 2015. The snapdragon 810 overheating scaremongering probably didn’t help things either!

    • thereasoner

      I’m one of those M7 users who bought the Galaxy S6. I love the M7, it’s still a fantastic device but the M9 was just too similar. I’m sure that the M9 is a fine smartphone, better than most I bet but it was going to give me pretty much the same user experience as my M7 so why upgrade to that?

      HTC learned a valuable lesson here, the same lesson Samsung learned last year with the Galaxy S5. You can’t keep making the same phone over and over again, even Apple whose customers will buy anything with the Apple logo on it, stops at a 2 year cycle and then brings something different.

      • Kwadwo Boadu

        You make some good points, and it is interesting to hear this from someone who actually owned the M7, as opposed to someone who just says something and has no personal experience to back it up.

        What do you mean when you say you would have the same user experience, is that in respect of how the software is or how performance is?

        Also, granted the devices look similar, but the same could be said about the Galaxy line, Iphone line, LG G line and Xperia line of devices. They all share similarities with their predecessors to show that they kinda come from the same family of devices. This is how they build up an iconic design and also some goodwill, so that when someone just catches a glimpse of the device they can be like oh that’s an Iphone, or a Samsung, etc. If you mean changing materials in the design, then I hear you, but you don’t really get more premium than aluminium unibody.

        • thereasoner

          Yes, I felt that the experience would be too similar in both the hardware and software. To be honest I’ve never bought from the same manufacturer twice in a row, ever. There’s a lot of flavours of Android to try with all the various UI enhancements/skins available and I like trying new things/new manufacturers .

          Perhaps if HTC had produced a device more along the lines of some of those stunning renders that were found online before the M9 release and made the camera improvements that the GS6 has then they may have kept me as a customer. I did really like my M7, it was the first phone that I ever kept for more than a year, it is that good. The M9 just didn’t peak my interest the way the Galaxy S6 did.

          • Kwadwo Boadu

            I think your approach is probably a bit different to how most people approach it. For example, most people continue using an OEMs UI because they liked their previous experience and favour it over others, they also prefer the similarity there is so there is not so much of a learning curve or getting used to some of the querks. But you are very right there the options in Android are thankfully plentiful!

          • thereasoner

            You’re probably right, look no further than Apple users for that, they have been buying the same phone since 2007 ;-)

            Besides relentlessly copying features from the competition Apple does change up the hardware every 2 years though and for good reason. I’m thinking that if HTC changed the hardware of their excellent M9 then it would have been better received. It’s just that for most consumers, when they see an older design /hardware, they think older/out dated tech as well. HTC needed to do more than produce a new phone, for the average consumer it had to look new as well I suspect.

  • Christian Barcelona

    Big blow for HTC but rightfully so. You cant just upgrade processor, make the camera worse and expect profit. On top of that, releasing two big time phones (M9+ and ME) only in China? Somebody tell HTC there’s a pretty big market in Europe and America aswell.

  • satsmine2k4

    this is the consumer way of telling htc – your m9 sucks…

  • NamelessStar

    very possible this woulda turned out better for them if they had released the m9+ to the world the day they released the m9….. could have changed all this garbage who’s the idiot that decided this lol..

    • Martin Lane

      The M9+ sucks even even more.

      • NamelessStar

        how so exactly? qhd vs fhd fingerprint scanner addition slight bump in screen size… if they had launched the m9+ and never done the m9 i could see them being in much better shape. i may have actually looked at the device than for one lol.

        • thelastguyX20

          It has a Mediatek processor :P

  • 007peter

    I’m not surprise. HTC is arrogant, non-competitive, and PRICEY (even here in Taiwan). HTC tries to push itself as a “premium brand” pushing premium prices matching Samsung and Apple iphones. The problems is for the same price, EVERYONE prefer Samsung/Apple over HTC. HTC need to WAKE UP and SMELL THE COFFE: You are NOT a Premium Brand, and STOP acting/pricing like one.

    I have no sympathy for HTC, M9 failure is HTC’s own making. An over-reliance on the old M7 design, smallish 5″ 1080P LCD, with mediocre battery life, and questionable Camera Quality. Stop giving us the BS 4mp marketing gimmick, and stop making the UGLY sense UI when 9/10 consumer prefer the stable stock rom.

    The world would not missed the over-inflated-ego of HTC, died already. We have Motorola X/G/E, Asus Zenphone, Alcatel Idol 3, and Xiaomi taking over your placed.

    • MattEgansHairLine

      Sounds like you prefer marketing over devices quality.

      Just because HTC don’t pay people to rubbish other brands or spend $14.5bn on marketing does not make them bad devices.

      The only roid OEM to offer two years of software support, four months better than google half imply you might get if you are lucky, the only OEM who comes close to Apples built quality.

      The best quality devices that use roid are HTC & Sony. The rest are cheap junk

      • jasonlowr

        You’re funny lol

      • John Kar

        The M9 is a downgrade compared to the M8, you retard.

        Worse screen, worse battery life, and worse performance. There is no “quality” in the htc or SONY camp, and being close to Apple’s build “quality” isn’t anything to be proud of, considering Apple uses cheap materials to cut costs. Their cheap aluminum crap bends at the slightest pressure.

        Also, many OEMs offer 2 years of software support. That’s not an advantage for htc.

      • thelastguyX20

        You must be smoking something really hard to read that the post he made was about marketing… it was CLEARLY about quality of the HTC. If you missed that part, let me quote it for you:

        “I have no sympathy for HTC, M9 failure is HTC’s own making. An
        over-reliance on the old M7 design, smallish 5″ 1080P LCD, with mediocre
        battery life, and questionable Camera Quality. Stop giving us the BS
        4mp marketing gimmick, and stop making the UGLY sense UI when 9/10
        consumer prefer the stable stock rom.”

        • MattEgansHairLine

          Really, everyone else read ‘spec whore’ who need numbers to make him s man, I was being polite.

          If you had even a basic understanding of digital imaging you would know that high pixel count actually means lower quality images.

          But as with all S.E.F roid ragers, you just shout about stuff between homework and bedtime with zero actual experience.

  • Gabriel Belmonte

    They just needed to improve one thing, the camera. Alas …..


    Maybe if you switch the M10 to a dual 2 ultra pixel camera with 3 LEDs for flash but keep the rest of the phone the same, it will sell!

    They need to cut at least half of the front real estate down. Get rid of that black bar

  • Paolo T.

    Headline Title: ‘HTC… writes off $93 million due to unused production capacity.’

    Reality: HTC losing money because ‘there are FIVE One-series variants we have to make and the Galaxy S6 twins are schooling all FIVE Ones.’ (I put ‘FIVE’ in all caps because no word can justify how ridiculous this strategy is.)

  • Phoneadopteer

    The crazy thing is the new9 is a great phone. Even the camera is okay for everyday users. If you read every review, they all applaud the build and sense 7. If the camera would havecbeen properly upgraded it would have been an acclaimed phone again. The thing I don’t get is the camera is better than last years model and everyone had it on the top of their lists. Now everything is different? They didn’t care about a mediocre camera a year ago.

  • EmmaDRuggiero

    &^^&^Going Back androidauthority There’s infoo

  • thelastguyX20

    It serve them right. They kept gunning for the metal design to win hearts but you hope it makes up for everything such as a lack of change and shoving a high megapixel camera so everyone will shut up about the gimmicky 4 MP “ultra pixel” camera….

    Well, HTC, I hope you learned that megapixels ISN’T everything. I still believe the camera can still be saved even though it has a shitty Toshiba sensor. They just need to fire the camera software development dept first and put in some more competent ones…

  • HTC needs to make phones that LOOK slim. It’s a bit pointless to make a slim phone that looks fat, it’ll drive people away from the product. Basically they need a new design with a flat back.