HTC to cut jobs, slim down smartphone portfolio after weak Q2

HTC said that it is going to cut jobs and expenses and produce fewer smartphone models, with a focus on the premium smartphone segment. The company, as expected, posted weak financial results for the second quarter and warned of a loss ahead on the third quarter.

HTC said in a statement that it "has begun to implement company-wide efficiency measures to reduce operating costs across the organization and ensure resources are appropriately allocated to future growth."

In a conference call with reporters, HTC CFO Chialin Chang said "the cuts will be across the board," and that "they will be significant," according to Reuters. Chang said the cost cuts would extend to the first quarter of 2016 but declined to give further details.

According to Bloomberg, Chang said HTC will now change its product strategy to produce fewer models spaced further apart while focusing on profits instead of growing shipment volumes.

In the second quarter, HTC posted a net loss of around $252.8 million (8 billion New Taiwan dollars). HTC reported revenue of $1.04 billion in the quarter, around half of the $2.05 billion in the second quarter of 2014. It's an indication that HTC's flagship One M9 smartphone did not gain traction.

HTC said it expects its third-quarter loss will be 17.4 cents to 185 cents per share, the company said Thursday, five times larger than expectations for a loss of 3.7 cents per share, according to Bloomberg. HTC cited sales of $600 million to $695 million, short of analysts' expectations of $1.16 billion, according to Bloomberg.

The company said that it saw "weaker than expected demand at the high end," consistent with the wider Android smartphone market, "along with weak sales in China." Meanwhile, HTC said it saw year-over-year shipment volume increases in "select key emerging markets."

According to Reuters, Chang said HTC is planning to sell high-end models in emerging smartphone markets such as India, where he said the company has a 20 percent market share of phones priced between $250-$400.

Yet Chang said overall sales were weak because consumers "prefer more fashionable phones" to those which HTC offers, according to TechCrunch. Chang also confirmed that "a classic version" of the One M9 that is more "trendy" will be coming to market alongside other phones with differentiated features.

However, Chang said the new product will "address premium segments" but will be less expensive than flagship phones, which could position the phone closer to the $300 to $400 phones that Huawei, Xiaomi and Lenovo have found success selling in China and elsewhere.  

HTC said it "continues to invest in promising new product areas such as virtual reality, where the company is working with over 1,000 developers on content creation over a wide spectrum of applications including gaming, entertainment and education, to ensure a compelling ecosystem ahead of the highly anticipated launch of HTC Vive at the end of the year." HTC is hoping the Vive will help it attract interest from video game enthusiasts and developers.

HTC is also developing new connected devices, including a fitness band through a partnership with sports apparel maker Under Armour. However, Chang said HTC won't see revenue from those projects until 2016.

For more:
- see this HTC statement 
- see this Bloomberg article
- see this Reuters article
- see this CNET article
- see this TechCrunch article
- see this IDG News Service article

Related articles:
HTC unveils new Desire smartphone lineup for U.S. carriers, with prices targeted at $200 and below
Analysts: Samsung, HTC and OEMs in general are losers in shift to equipment installment plans
HTC shoots down idea of a merger with Asustek
HTC slashes Q2 revenue forecast, citing weakness in China, premium smartphone sales
HTC expects Q2 sales to plunge by as much as 29% as turnaround gets bumpy
HTC earns small profit in Q1 as sales of One M9 smartphone begin

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