HTC expects One sales to boost Q2 numbers

HTC executives sidled past the company's record-low profit for the first quarter and instead looked ahead to the future, predicting sales will rise almost two-thirds sequentially in the second quarter thanks to sales of the company's new flagship smartphone, the One.



The Taiwanese smartphone maker said its net profit for the first quarter was around $2.8 million, way down from the $148.1 million it reported in the year-ago quarter. HTC's revenue fell to $1.42 billion. However, looking ahead to the second quarter, HTC said it expects revenue to jump to around $2.37 billion, which would be 64 percent above its first quarter revenue but still 23 percent below the revenue it had in the second quarter of 2012.

However, HTC forecasted margins for the second quarter that were below expectations. The company said it expects its gross margin will be 22 percent to 24 percent, below the 24.6 percent average of 19 analyst estimates compiled by Bloomberg.

HTC's marketing spend is likely dragging on the company's margins. "We're improving the HTC marketing execution. It's the first time since HTC developed its brand that we are really integrating brand, product and marketing all together," company CEO Peter Chou said on the earnings conference call, according to Reuters.

HTC said in March it would hike its digital media marketing budget for the first half of this year by 250 percent year-over-year, while its budget for traditional media will double.

So far, HTC said, sales of the One are off to a good start, though the company didn't provide specifics. The high-end Android smartphone, which has been praised by reviewers, is on sale now in the United States through AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S), T-Mobile US (NYSE:TMUS) and Cincinnati Bell.

HTC CFO Chang Chia-Lin said the company is working to keep One sales steady throughout the year, "We want to have initial strong momentum, but more importantly we want the momentum to carry over into the second half," he said, according to the Wall Street Journal.

"HTC One demand is good, but it's not going to propel sales of other products or ensure momentum through to the end of the year," Dennis Chan, an analyst at Yuanta Financial Holding in Taipei, told Bloomberg. "Meanwhile, the high cost of the phone, bad yields, and competitive pricing all play a part in keeping margins below expectations."

As part of its One push (which is going up against Samsung Electronics' Galaxy S4 launch), HTC said that this weekend U.S. customers who purchase the One and trade in a qualified smartphone can get at least $100 and as much as $375 for their old device. The offer is open to customers with the iPhone 5, iPhone 4S, Galaxy S III, BlackBerry (NASDAQ:BBRY) Z10, Curve and Bold, the Motorola Droid Razr and the LG Optimus 4X HD.

For more:
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Bloomberg article
- see this separate Bloomberg article
- see this Reuters article
- see this CNET article
- see this HTC page

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