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HTC predicts Q1 will match downward trend

TAIPEI--Taiwanese smartphone maker HTC Corp. forecast Monday that it will stay in the red in the first quarter of 2014, its hopes for a quick turnaround undermined by a saturated high-end market and pressure from budget phone vendors.

HTC projected its first-quarter consolidated sales to be between NT$34 billion (US$1.12 billion) and NT$36 billion, which would represent a 16-21 percent decline from its NT$42.9 billion in sales in the fourth quarter of 2013.

Gross margin will rise from 17.8 percent in the last quarter to between 21.5 percent and 22 percent in the January-March period, and net loss per share will be between NT$2.1 and NT$2.6, HTC said in an e-mailed statement.

“We will continue to stay focused on making the best smartphone and building a compelling mid-range portfolio. Meanwhile, we are going to communicate better with consumers,” HTC CEO Peter Chou said in the statement.

HTC also reported consolidated revenue of NT$9.67 billion for January 2014, the lowest monthly total since February 2009, when it posted monthly revenue of NT$9.21 billion.

The Taoyuan-based company came under heavy pressure last year from a declining share of the high-end smartphone market and its inability to make inroads into faster growing market segments.

It posted its first quarterly loss as a publicly listed company in the third quarter of 2013 and recorded its second straight quarterly operating loss in the October-December period.

UBS Securities forecast on Feb. 6 that HTC's first-quarter sales will decline by 18.6 percent from the previous quarter and by 18.4 percent year-on year to NT$34.9 billion.

The brokerage firm maintained a “sell” rating on the stock and trimmed its price target to NT$79 from NT$82, citing HTC's lack of scale and risks in the company's operating margin.

HTC shares fell 3.79 percent Monday in Taipei to close at NT$127, lagging behind the 0.05 percent rise in the benchmark Taiwan Stock Exchange index.

A recent analysis by technology research firm Gartner Inc. suggested that HTC will have trouble pulling out of its slump if it cannot move into less expensive product segments.

Gartner concluded that while the mobile phone market as a whole should continue to experience steady growth, the growth opportunity for smartphones with high average selling prices has run its course.

Growth is now expected to come from mid-tier smartphones in mature markets and low-end Android smartphones in emerging markets, Gartner predicted.

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