HTC charges back to profit in Q2 thanks to One M8 and mid-range phones

HTC reported a sharp uptick in profit for the second quarter thanks in part to sales of its flagship One M8 smartphone, the release of mid-range devices and cost cutting measures. Although the Taiwanese smartphone maker still has a steep hill to climb, the results could point to signs of a turnaround after its struggles in recent years.

HTC posted a net profit of around $75.5 million in the second quarter, which was up 80 percent from $41.75 million in the year-ago quarter and a rebound from the $62.8 million net loss the company reported in the first quarter. A survey of 16 analysts by Thomson Reuters had expected HTC would report net profit of around $69.8 million for the second quarter.

Yet, as the Wall Street Journal notes, HTC's revenue barely met its own guidance, pointing to intense competition that continues not only at the end high end of the market from Samsung Electronics and Apple (NASDAQ: AAPL) but also from Chinese vendors Huawei, ZTE, Lenovo Xiaomi and others at the lower end of the market. HTC reported revenue of $2.17 billion for the second quarter, at the low end of its projected range of between $2.17 billion to $2.34 billion.

For months HTC has been banking on the success of the One M8, which went on sale at the end of March but reached wider availability in early April. The phone--which boasted improvements to hardware, camera technology and software over its 2013 predecessor, the One M7--has been widely praised.

HTC CFO Chialin Chang said in May that HTC had been working to improve its supply chain and had started outsourcing some production to cut costs. The company has also introduced new mid-range Desire-branded phones, which take the design sensibility of the One line but are aimed at lower price points.

HTC also sold a stake in a Chinese private-equity fund in the last quarter, the Journal noted, for which the company said it would book a pretax gain of around $2 million.

Despite the solid financial news in the second quarter, some analysts are skeptical HTC can mount a comeback, especially in the face of what is likely going to be a major new iPhone refresh from Apple in the fall as well as continued competition from other players. Some are pushing HTC to get into the wearables market.

"Every year there's a new 'hero' product release and a quarterly uptick, but it often fizzles quickly," KGI Securities analyst Richard Ko told Reuters ahead of the earnings release. "This year the competition is even more fierce."

CIMB analyst Wanli Wang told the Journal: "As features of Android phones are becoming more homogeneous to consumers, their life-cycle is now at best two to three months. I don't see a clear catalyst for HTC in the second half this year."

Meanwhile, there are new rumors that HTC might be getting back into the tablet market, which has been largely dominated by Apple, Samsung and Amazon (NASDAQ: AMZN). According to noted leaker @evleaks, HTC is working on a tablet codenamed Volantis that will sport a silver aluminum unibody frame, a 64-bit Nvidia Tegra K1 processor, 5 GB or RAM, 64 GB of internal storage, and either a 5-megapixel or 8-megapixel rear-facing camera.

In June reports emerged that HTC could be prepping a tablet with an 8.9-inch screen that is might be released in the fourth quarter through Google's (NASDAQ: GOOG) Nexus device program. According to a report from Android Police, the device will be powered by the Nvidia K1 processor, will sell in Wi-Fi-only and LTE versions, and will be called the Nexus 9.

For more:
- see this WSJ article (sub. req.)
- see this Reuters article
- see this The Verge article
- see this CNET article

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