HTC squeezed by Samsung as revenue and profits plummet

Photograph: Aflo /Alamy

The Taiwanese mobile handset maker, HTC, showed the extent of the squeeze it is suffering from South Korean rival Samsung as it warned first-quarter revenues could fall 17% compared to the last three months of 2012, and operating profit margins could drop almost to zero.

Profits for the fourth quarter had crashed by 90% year on year to just NT$600m (£12m) on revenues of NT$60bn, down 40%, the company said as it unveiled its annual results.

The projected drop in first-quarter revenues would leave HTC smaller than at any time since the first quarter of 2010, when its burst of growth began. The company said on Monday it expects revenues of between NT$50bn and NT$60bn, compared to NT$65.8bn in the first quarter of 2012.

The company also steered towards lower operating margins, of between 0.5% and 1.0%; in the fourth quarter, operating margins were pushed down to just 1%, ekeing out a profit of just NT$600m on revenues down 40% year on year to NT$80bn.

The company, which is preparing to launch a new 5in smartphone codenamed M7 later this month to compete with Samsung’s Galaxy Note “phablet”, is being heavily outspent by rivals Apple and Samsung, which together dominate the US smartphone market. Samsung spent roughly $14bn (£8.9bn) on marketing in 2012, while Apple spent about $1bn; HTC’s marketing spend is substantially smaller.

HTC tried in 2011 to give its brand a stronger identity by buying 50.1% of Beats Electronics, the high-end headphones company founded by rapper Dr Dre, for $300m. But the strategy was unsuccessful and it sold back a 25% holding in July 2012 for $150m.

Despite the rapid growth in the smartphone market, and Android’s dominant position in it – especially in China – the profits in the business are being captured almost exclusively by Apple and Samsung.

Of the remaining handset companies, only HTC and Nokia managed to make an operating profit in the fourth quarter, but barely comparable with either of the other two companies’.

The company also reveals in its full-year accounts that the patents it owns have fallen in value from NT$11.15bn at the end of December 2011 to NT$9.18bn at the end of 2012. That may relate to a “loan-back” arrangement under which Google gave HTC a number of patents to help defend itself against a number of lawsuits from Apple.

HTC and Apple settled their dispute in November 2012, signing a worldwide licensing agreement, which could mean HTC has returned the title to the patents to Google. Alternatively it could point to previous valuations on patents essential to the 4G standard being devalued after the US Federal Trade Commission and European commission both indicated that using such “standards-essential patents” to seek sales bans against rivals would be frowned on, and could attract fines.

The accounts also point to a business under increasing stress, as Samsung increases its marketing spend and offers phones across the entire range of the market, squeezing HTC – once the biggest-selling Android brand in the US – into the position of also-ran.

Inventory turnover days – the length of time it takes the company to rotate raw materials into finished goods – extended from 43 days a year ago to 54, while the number of “payable days” of debts grew, despite the fall in revenue, from 105 days to 138.

Shame really, I am a firm believer in doing things in a logical and efficient manner. Therefore prefer if my gadgets and products are as open as a library allowing me to customize and pair it with any branded device.

HTC is my first smartphone and I have always stuck with it. Sure Samsung has the the better looking phone with the Amoled technology screen showing brighter colours. Apple has the sleek phone and the solid build armour phone as well as the fool proof technology for all the Apple fan-geeks.

Yet with my HTC I can……….

– turn it into a USB drive by plugging it into the computer, no need to external software to transfer files (Samsung you need file transfer manager or take out the memory card, Apple you need to be on YOUR computer to sync additional items)

– I can transfer music/videos to my friends with just a usb cable as well as charge my phone, as well as add new music I dl elsewhere and place into my phone to listen on the way home. (Apple you will need to buy it and sync to your computer)

– You need to give all your details and payment info to Apple before you can download music and sync your files to cloud and allow other computers to access said information so you can again sync this

– It takes hours to update a the software from 4 to 6.1 (took me 6 hours)

– I can search a phone contact by dialling the number or their name as in “Home” can be dialled by the last 4 digits or just 4-6-6-3 (“home” on dialling pad)

– I can transfer, copy in, take out things straight from the phone directory without worrying about syncing issues where it wipes out your phone….ahem

– The HTC Desire S had a settings button as a long press, but it’s been moved to the drag down menu…..imo not as efficient

– HTC camera has warmer tones to it. Samsung camera has a harsh light and everyone is very washed out (although thumbs up to Apple who has better night camera for pictures in a club/bar as HTC night shots are rubbish)

– However, Apple and Samsung has better front camera for the Asian self-shots are so Asianly cute with customary V signs ==> (^.^)v  HTC why are your front cameras indented?! it collects dust!? why you no give me self shots!

– Also HTC…….why u no give my strap loop!? your Taiwanese! adding straps of various sizes like a christmas tree should be in your culture by now!

Other then that, I don’t really need a super phone. Samsung multi-task function? please I have a Note10.1 for that.

But for now  ( ^ 3^) One X I still ❤ you…


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