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HTC forecasts recovery: but is the One the cure-all or just a bandaid?

HTC is forecasting a revenue of NT$70billion in Q2 2013, is the HTC One proving to be the turning point for the struggling manufacturer?
May 2, 2013
htc one

No one can deny that it’s been a tough year for HTC; dwindling profits, component shortages, and a slump in market share are leading many to wonder about the future of the Taiwanese manufacturer. It seems like the company’s success could well be tied to the fate of the HTC One, so I’m sure that HTC’s CEO Peter Chou was happy to read the positive reviews after suggesting that he’ll step down if the HTC One flops. But even so, there is still an air of do or die surrounding the company.

In the meantime smartphone rivals LG and Samsung have both had excellent starts to the year, but HTC’s first quarter financial results were poor, very poor. The company announced a record low for its profits just a few weeks ago, only managing to scrape together $2.8 million compared with $470 million over the same time period in 2012.

Surprising though, it seems that HTC is expecting a substantial turn around come the second quarter of the year, however the key word to note there is “expecting”. At an earnings call earlier today HTC stated that it has a much healthier outlook for Q2 2013. HTC predicts a huge 64.6% jump in revenue back up to around $2.4 billion (NT$70billion), compared to the $1.45 billion (NT$42.8 billion) collected in the previous quarter.

Providing these forecasts are accurate, this would put HTC back on par with its performance at the start of last year. But is it going to be enough to save the struggling company?

Of course HTC will spin this as a huge turn around; Peter Chou has already stated that the company will be fine in terms of cash flow, and that it can continue to support both Android and Windows Phone hardware in the future. Supply woes are now set to be a thing of the past, so everything seems bonny, right?

Well let’s look at something more concrete, the figures.

HTC Quarterly Revenue

A quick glance at the quarter on quarter revenue and you can see a clear down slope since the summer of 2011, but HTC’s forecast of $NT70 billion in revenue for the next quarter would go some way to break this trend. But no matter how much HTC would like to convince us otherwise, it’s certainly not enough to confirm a turnaround for the company, after all Q2 2012 saw a similar lift before continuing down. The Q2 forecast on it’s own in very healthy, but if it’s the peak revenue generated by HTC this year then things won’t look so good come the fourth quarter.

In all honesty, having looked more closely at the figures myself, I’m highly doubtful that the HTC One alone will be enough to restore the company to its previous heights. More likely, it’s a temporary Band-Aid over a deeper wound.

htc one vs sony xperia z one performance aa
The HTC One is a great handset, but can it be relied on solely to turn HTC’s performance around?

What makes Samsung so strong, and what is also helping other competitors like LG and Sony, is that the company has a wide array of decent handsets to fit a range of budgets. HTC does not, and there seems to be very little interest in its other new projects like the Facebook Home powered First.

Banking on a single handset is a precarious position to be in, and even though the HTC One is looking to be a successful smartphone, it’s all a little too late. The figures don’t lie; HTC has clearly been on a downward slope for almost two years and it’s going to take more than a single return to 2012 revenue levels to claim that the company is out of the woods.

Having said that, HTC certainly isn’t down and out, it’s still turning a profit and the forecast Q2 results should give the company an opportunity to invest in new developments.

But it’s going to be a long climb back to the top.