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HTC forecasts another bad quarter, as China remains its last growing market

August 3, 2012
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To get an idea of how the smartphone business is these days, consider that Samsung is one of the few manufacturers that had positive figures to show to shareholders in the second quarter of 2012. Sony yesterday announced losses, in spite of growing revenues in the mobile business, while LG slipped backed in the red, after the good performance from the first quarter of 2012. Even Apple somehow disappointed investors by missing estimates in Q2 and shipping fewer iPhone than expected.

HTC announced a puny $250 million in profit in the second quarter, a massive 57% lower than in the previous three months. Taiwanese execs blamed the lackluster performance of the company on the economic conditions in Europe and the botched launch in the US (partly caused by Apple’s litigation tactics).

Now, HTC is warning investors about another bad quarter, with a 23% fall in revenue and falling sales in all markets but China. The official guidance forecasts revenue between $2.3 billion and $2.7 billion, which is much lower than $3.08 billion, the average estimate of 18 analysts interviewed by Thomson Reuters.

HTC says that the main causes of its disappointing performance are the poor macroeconomic climate and the strong competition (read Samsung). Reuters quoted the company’s CFO as saying that the only growth engine remains China, while HTC will register declines in revenue in the other major markets.

In China (and India), the Taiwanese managed a surprisingly good evolution in the last months, spurred by the release of several low and mid-end devices from the Desire series. However, analysts put into question HTC’s long term potential in the largest smartphone market of the world, as competition from local players, like ZTE and Huawei, is only likely to become fiercer.

Moreover, in the short term, the outlook remains negative for HTC in the Western markets. AT&T cut the price of the HTC One X in half just three months after the phone’s official launch, which is a telltale sign that the carrier has troubles selling HTC devices. Meanwhile, the Galaxy S3 is flying off the shelves and the iPhone 5 is just around the corner, with a rumored September 12 announcement date.

2012 shapes out to be another lost year for HTC, and the company’s future is increasingly murky. Sadly, a weak HTC is bad news for the entire Android ecosystem. Competition drives innovation, and the Android world needs a counterbalance to the increasingly successful Samsung.