TAIPEI — Taiwanese smartphone manufacturer HTC Corporation will shift its focus more towards emerging markets and will offer lower priced phones in China this year as it grapples with slumping revenue in the shadow of Apple’s iPhone and Samsung’s Galaxy series.
HTC gave a disappointing outlook on Monday for first-quarter revenue, saying it would be flat to 17% lower than in the previous three months — worse than analysts had forecast — while margins are also seen holding steady or shrinking.
The former contract manufacturer’s fortunes have been declining sharply since the second half of 2011, as the growing global dominance of Apple and Samsung Electronics in smartphones quickly deflated the success of its own brand’s rapid rise. China, the world’s most populous nation and a rising consumer power, is a key battlefield for smartphone makers with its still low levels of penetration, but its price-conscious consumers pose a dilemma for premium brands keen to maintain their high-end image but eager to tap the mass market.
HTC chief financial officer Chang Chia-Lin told a conference call for investors on Monday that his company, which relied on developed markets for most of its revenue, and in China has focused on mid-to high-end models, was now ready to offer smartphones priced less than 1,999 yuan ($320) — currently its cheapest phone in China.
"We’re going to go down, but not below 1,000," he said. "We see there’s still room to play" in 1,000 to 2,000 yuan cellphones.
Mr Chang said HTC would also more closely target emerging markets overall this year. It expanded its reach to Myanmar last month by introducing local-font phones.
Apple CE Tim Cook has vowed to focus on Greater China as Apple’s next big growth driver. Its revenue from the region jumped to $7.3bn in the December quarter, up 60% from a year earlier.
HTC said it expected first-quarter revenue of 50-billion New Taiwanese dollars to 60-billion New Taiwanese dollars ($1.69bn-$2.03bn).
That compares with 60-billion New Taiwanese dollars in the fourth quarter and 65.75-billion New Taiwanese dollars a year ago.
Some 18 analysts polled by Thomson Reuters had forecast HTC would earn revenue of 62.77-billion New Taiwanese dollars for the quarter.
HTC also said it expected a first-quarter gross margin of about 21%-23%, flat to lower from 23% in the prior quarter, and an operating margin of 0.5 to 1.0%, also flat to lower from 1%.
The weaker than expected first-quarter revenue outlook follows a 91% year-on-year slide in the Taiwanese company’s net profit in the fourth quarter that fell short of analyst forecasts.
Analysts doubt this year will be a turnaround year for HTC.
However, some have said that the next version of its flagship smartphone, code-named M7 and which they expect to be launched in the middle of this month in New York and London, could give the HTC a first-mover advantage of a few months on features such as higher-resolution cameras. Mr Chang declined to give details or a launch date for the new model but said he expected sequential revenue growth quarter to quarter this year as HTC rolled out new products.
Samsung Electronics, the world’s top smartphone maker, said last month it expected the global smartphone market to shrink in the first quarter from the seasonally strong fourth quarter, while the overall handset market would see growth at a mid single-digit percentage rate this year from next year, with the smartphone segment set to slow.
Strong smartphone sales powered an 89% increase in operating profit at the Korean company in the October-December quarter to a record $8.3bn.
Apple, based at Cupertino, California, faces intense competition from Samsung.
Apple’s share price slid late last month when it forecast lower revenue of $41bn to $43bn in its current financial quarter, down from $54.5bn in the previous quarter and below the average Wall Street forecast of more than $45bn.
On Monday, shares of HTC fell 1.6%, versus a 0.9% rise in broader market. HTC’s shares have fallen more than 40% since the start of last year, compared with a 12% rise in the Taiwan stock benchmark.