News Column

HTC Shares Dive After Profit Plunge

October 9, 2012

Shares of HTC Corp, the world's fifth largest smartphone maker, dropped by 7 per cent, the daily limit allowed on the Taiwan Stock Exchange, Tuesday after the company reported weak profits for the third quarter.

The dive in HTC's stock followed the company's report late Monday that profits fell 79 per cent in the third quarter compared to the same period last year. Net income dropped to 3.9 billion Taiwan dollars (133 million US dollars). HTC enjoyed net income of 18.7 billion Taiwan dollars in the third quarter of 2011, when the company led the US smartphone market in sales.

The swift fall came as the Taiwanese smartphone maker struggled to compete against Samsung Electronics Co and Apple Inc on premium smartphones. Both rivals have enjoyed record profits this year with new products. Samsung's Galaxy S3 sold 20 million units in its first three months of sales, while Apple sold 5 million iPhone 5 units in its opening weekend.

Samsung, which is HTC's closest competitor in terms of product mix, has an advantage over HTC in both hardware and marketing, according to Peter Liao, an analyst at Nomura Securities.

"Samsung makes a lot of hardware components in-house," Liao said. "They can make their phones thinner, their displays crisper, and their processors faster than HTC. Plus, Samsung spends at least five to 10 times more on marketing their products."

This year, HTC has pledged to pivot more attention to China, with chairwoman Cher Wang calling her company a "Chinese brand" in January.

But the company still lags in 9th place in market share in China, according to research firm IHS iSuppli. Price-sensitive Chinese consumers have been purchasing low-end smartphones, at one-third of HTC's price, from Chinese vendors such as Huawei Technologies and ZTE Corp.

Huawei and ZTE rank ahead of HTC in the China market share at fourth and sixth place, respectively, according to IHS iSuppli's most recent data from the second quarter.

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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