HTC'S Q2 profit sinks amid weaker sales

HTC said its net income in the second quarter fell 58 percent compared with the year-ago period due to weaker sales in Europe and patent battles in the United States. 

The Taiwanese smartphone maker, which cut its second-quarter revenue forecast in early June, reported net income in the quarter of $247 million, down from $585.4 million in the year-ago period. As it had forecasted, revenue clocked in at $3.04 billion, up from the $2.26 billion in had in the first quarter of 2012, but down 27 percent from from the $4.14 billion it had in the year-ago quarter .

When it cut its forecast in June, HTC blamed the weak second-quarter results on weaker sales in Europe and delays in getting some of its products through U.S. customs. (An Apple (NASDAQ:AAPL) patent lawsuit delayed some of HTC's products at U.S. customs.) HTC has been struggling to regain competitive momentum against both Apple's iPhone and Samsung's Galaxy line of smartphones, especially in the U.S. market.

To regain its footing, HTC has slimmed down its product line to focus on its One series of Android smartphones, which emphasize the phones' cameras and audio experiences, as well as HTC's Sense user interface. So far, however, those phones do not appear to be making much of a dent in the market. HTC's struggles come as sales of Samsung's Galaxy S III are getting underway and ahead of an expected iPhone refresh in the fall.

"We expect HTC to continue to see severe ASP [average selling price] and margin pressure and a potential risk of running into operating losses in 2013," Citigroup analysts Kevin Chang and Jonathan Gu wrote in a July 5 report, according to Bloomberg. "HTC is likely to survive in the long term but things are likely to get much worse before they get better."

HTC CEO Peter Chou said in mid-June that the company will remain focused on the mid-to-high end of the smartphone market despite its recent struggles. "We don't want to destroy our brand image," Chou said in an interview with the Wall Street Journal. "We insist on using better materials to make better products that offer premium experience. Many consumers like that." The mid-to-high end of the market also provides higher margins.

HTC also has vowed to focus on emerging markets, such as China and India, to bolster its sales. 

For more:
- see this release (PDF)
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this Slashgear post

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