HTC sinks to record-low profit in Q1 amid One launch delay

HTC's net profit in the first quarter plunged as the company's earnings took a hit because of launch delays for the One, HTC's flagship smartphone around which it is basing its 2013 turnaround strategy.

The Taiwanese smartphone maker said its unaudited net profit for the first quarter was around $2.8 million, compared to $148.1 million in the year-ago quarter. The average of 19 analysts' estimates compiled by Bloomberg was for profit of around $19.9 million.

HTC said total revenue for the quarter clocked in at $1.42 billion, down 37 percent from the year-ago period when it had $2.25 billion in sales. Analyst had expected $1.81 billion in revenue, according to Bloomberg.

HTC's momentum stalled when the company was forced to push back the launch of the One smartphone by several weeks in some markets due to component shortages. "These numbers show the production shortage really is that bad, and my sense is that it won't get much better in the second quarter because many of those issues continue," Dennis Chan, an analyst at Yuanta Securities Co. in Taipei, told Bloomberg. "For smartphones, timing is everything and the delay means they lose that timing."

"HTC's whole schedule was thrown into disarray because of the HTC One, which meant it didn't have the revenue coming in but still had a lot of fixed costs," Daiwa Securities analyst Birdy Lu told the Wall Street Journal. "There will be some improvement this quarter in terms of the bottom line, but they still face a lot of competition."

AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and T-Mobile USA will start selling the One later this month. HTC has said the One will be available globally through more than 185 operators and major retailers in more than 80 regions and countries.

"We are seeing our strongest initial response for any smartphone we've ever designed with several hundred thousand people in the U.S. pre-registering to purchase the new HTC One," Jason Mackenzie, HTC's president of global sales, wrote in an email to customers in March.

The One has several unique features that HTC is going to use to differentiate it from the competition. One is BlinkFeed, which turns the device's home screen into a single live stream of personally relevant information that includes social updates, entertainment and lifestyle updates, news and photos. HTC's One camera also uses what it calls "UltraPixels," which the company said gather 300 percent more light than traditional smartphone camera sensors. HTC has said this new approach will dramatically improve low-light camera performance.

HTC is also making a splash with the HTC First, the first smartphone loaded with Facebook's (NASDAQ:FB) Home for Android user interface. "It's big for us," Mackenzie told AllThingsD. "We've got to get the brand out there in huge ways."

HTC recently launched an 11-city "Live Experience Tour" in the United States to highlight the features of the One and generate buzz in key markets. The tour is part of an aggressive and targeted new marketing approach from HTC, which needs the One to be a success, especially in the U.S. market.

HTC's One launch will being going up against Samsung Electronics' Galaxy S4, which likely will receive much more marketing support than HTC can afford. To compete head-to-head with Samsung's Galaxy S4, which will also go on sale shortly at Tier 1 U.S. carriers, HTC has said it will be louder in its marketing approach. As a result, the company is discontinuing its "Quietly Brilliant" marketing tagline. HTC said it will increase its digital marketing budget by 250 percent this year compared with 2012, and will increase its traditional media marketing spending by 100 percent.

For more:
- see this HTC post
- see this Bloomberg article
- see this Reuters article
- see this WSJ article (sub. req.)
- see this AllThingsD article

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