HTC Q3 loss likely to be worse than expected: Nomura
CNATAIPEI -- A disappointing line-up of new products at HTC Corp. is likely to mean worse-than-expected losses for the Taiwan-based phone vendor during the third quarter, according to a research note by Japanese brokerage Nomura Securities.
October 1, 2013, 12:09 am TWN
Nomura predicted HTC will reach only the low end of its third-quarter sales guidance, between NT$50 billion (US$1.69 billion) and NT$60 billion, with an operating margin of minus 5.8 percent.
The brokerage firm also forecast HTC will record losses per share of NT$2.4, down from a previous projection of NT$0.74.
“We believe HTC's execution of new product delivery will continue to be disappointing into the second half of 2013,” wrote Nomura's Anne Lee in the Sept. 27 note.
Lee noted the success of HTC's One Max handset in the high-end market may be hurt by the company's decision to skip Qualcomm Inc.'s latest S800 chipset, which can be found in phones from competitors including Samsung's Note 3, Xiaomi's Mi 3, and Sony's Xperia Z1.
Product Mix to Shift to Mid-low End in Q4
“Given the lack of strong high-end products, we think HTC's fourth-quarter mix will shift to mid/low end, with limited sales and margin improvement,” she wrote. “Under the pressure of losses, we believe HTC may resume talks to outsource its manufacturing.”
With a possible delay in launching the second-generation Butterfly phone, however, the company may find its mid-to-low-tier line-up in need of improvement, she said.
Meanwhile, Lee cut her loss per share estimates for 2013 to NT$0.4 from NT$1.3 and for 2014 to NT$2.5 from NT$4.4. She gave the stock a “reduce” rating and trimmed its price target to NT$103 from NT$135.
Shares in HTC had edged up 1.54 percent at NT$132 Monday, versus a 0.69-percent decrease in the broader market. In the first eight months of this year, HTC suffered the steepest decline of the 813 companies listed on the main board, losing 47.31 percent.
It is widely expected in the market that HTC will incur losses in the third quarter against new models from major rivals Apple Inc. and Samsung Electronics Co.
To boost its bottom line, HTC announced on Sept. 27 it will sell its remaining 24.84-percent stake in U.S.-based headphone maker Beats Electronics LLC for US$265 million, which will generate about NT$2.52 billion in pretax profit.
In another statement on Sept. 4, HTC said it had agreed to sell its 100-percent stake in London-based digital content provider Saffron Digital for US$47 million, which will produce a profit of NT$156.94 million for the beleaguered smartphone company.