HTC posts first ever quarterly loss

Taiwanese smartphone manufacturer HTC has posted its first ever quarterly loss. The firm made a net loss before tax of NT$2.97bn ($100m) for 3Q13. Revenue stood at NT$47.05bn.

The firm warned of the loss back in July. It said in a statement at the time that operating margin for the quarter was expected to be in the range of zero per cent to negative eight per cent. It had just posted revenue of NT$70.7bn in 2Q13, 22 per cent down year on year.

Last month, it also announced that it will reduce its US workforce as it looks to “streamline and optimise” its operations in the country.

“HTC is in an awkward position as it is playing in the high end,” commented Malik Saadi, principal analyst at Informa Telecoms and Media. “This segment is increasingly being controlled by Apple and Samsung, so it’s becoming difficult for others to make a profit.”

He added that in terms of handset quality, HTC has proved its ability to provide superior technology and elegance in design. However, its commitment to using high quality, expensive materials in the handsets is impacting the firm’s bottom line.

“If you want to play in the high end, cost control and control over the supply chain is essential to making a profit,” Saadi added. “Samsung is a very large company with multiple divisions and has its own components which uses in its handsets, allowing it to keep costs down without compromising on innovation.”

“Apple is in the same boat; it has an element of supremacy in the market and has been very innovative. Everyone is vying to partner with Apple and supply components and some effectively design their components with the iPhone specifically in mind. This gives Apple a powerful position to negotiate with suppliers, due to its brand and volume. Everybody wants their component to be used in the phone that sells nine million units in the first three days of launch.”

He suggested that HTC either needs to reposition itself in the market or find a way to “verticalise” and gain more control over its supply chain.

HTC is not the only vendor struggling to keep up with market leaders Apple and Samsung. Japanese vendor NEC announced in July that it would cease the production and sale of smartphones, admitting that it is “difficult to foresee improved performance in the future”. And last year, Microsoft posted its first ever loss as a public company in the quarter ended June 30, 2012.