HTC has cut its second quarter guidance and begun a strategic review of its assets amid lower demand for its flagship smartphone and weak sales in China.
The Taiwanese smartphone maker has been under pressure in recent years from the likes of Apple and Samsung at the high end of the market, and from the likes of Xiaomi and Huawei at the other.
On Friday, HTC announced it now expects to report an earnings per share (EPS) loss of between NT$9.70 and NT$9.94 for the second quarter, compared to an earlier forecast of an EPS profit of NT$0.06-NT$0.34.
The company also cut its Q2 revenue outlook to between NT$33 billion (€952.3 million) and NT$36 billion, from a previous forecast of NT$46 billion-NT$51 billion, and lowered its gross profit margin guidance to 19%-19.5% from 23%-23.5%.
HTC attributed the lower revenue guidance to slower demand for high-end Android devices and weaker-than-expected sales in China. It attributed the lower gross margin outlook to changes in product mix and lowered scale, and warned that increased competition has raised marketing costs.
"In recognition of prevailing market conditions, HTC has embarked on a comprehensive review [of] our assets based on current business conditions and future operational needs," said HTC, in a statement, resulting in a NT$2.9 billion impairment charge.
"The source of this warning is almost certainly the poor reception of the [HTC One] M9, which was hoped to be the engine of revenue and profit generation this year," said Radio Free Mobile founder Richard Windsor, in a research note.
Unveiled at March’s Mobile World Congress, the HTC One M9 is the latest edition of the company’s flagship smartphone range.
While the handset packs plenty of firepower in terms of features, aesthetically it did not represent much of a departure from its predecessor, the M8.
By comparison, Samsung’s flagship Galaxy S6 Edge is easily identifiable by its curved touchscreen.
"The M9 is very similar to the M8 and I suspect that most users (myself included) can’t tell the difference," said Windsor, who also noted that HTC is also lacking a broader ecosystem, unlike Samsung, which also makes tablets and smart TVs, and is making a big push into services such as mobile payments.
Meanwhile, HTC chairwoman and CEO Cher Wang said her company has set four business goals for 2015: making the company’s smartphones more competitive, improving efficiency, streamlining business processes, and pursuing opportunities beyond smartphones.
"We have full confidence in achieving our vision and maximising shareholder value through our world-class innovation and by seizing the exciting new business opportunities in the connected lifestyle space," she said.
