HTC's Woes Continue, Now Expects Q2 Loss up to $290M

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After coming back to form with the launch of the revolutionary HTC One M7 in 2013, and garnering much improved sales in 2014, driven by the critically acclaimed One M8, HTC has fallen afoul of the dreaded “one step forward, two steps back” predicament. The One M7 brought HTC out of the red, only to be plunged back into losses two years later by the One M9. Since the launch of the One M9 HTC’s shares have been on a downward spiral, reaching a new low of $2.99 after markets closed on Wednesday, lower than its book value, or the total value of all assets after debts, making the stock technically fragile, prompting talks of potential buyouts by rivals. The bad news doesn’t stop there. HTC just announced they expect to record a net loss of $257 million to $291 million in the second quarter, which ends June 30.

Total revenue for the second quarter is expected to range between $1.07 and $1.17 billion, a potential decline of 21% when compared to the $1.35 billion in revenue HTC captured in Q2 2014. This is not surprising considering the Taiwanese company recently slashed component orders by 30%, largely due to weak demand for the One M9, which resulted in a one-off loss of $94 million for “idled assets and prepaid expenses”, in other words, paying component manufacturers for unused capacity. For the month of May, just one month after the release of the One M9, revenue totaled approximately $350 million, much lower than the $438 million reported in April, which happened to be the worst April the company has experienced in six years; these figures really highlight the degree to which the One M9 has failed from a commercial perspective.

At the moment HTC is banking on three flagships released in Asian markets, the One M9+, the One E9+, and the recently announced One ME; HTC has certainly reversed their decision to release one “One” each year. However, considering Cher Wang forecasts weaker than expected sales in China it seems unlikely that three flagships highly similar to the One M9 and each other will reverse HTC’s ailing position. The best bet for HTC this year is a new “hero” product slated for October, and a potential November release of the HTC Vive VR headset, developed in conjunction with gaming super-power Valve. Over the long-term simplifying their smartphone portfolio, which started in 2013 but has all but ended, refocusing on innovative products outside of the highly competitive smartphone industry (i.e. HTC RE, and Vive), and drastic improvements in the next generation of the One series are HTC’s only hope if they want to remain HTC proper. Though the task seems daunting HTC has demonstrated they can dig themselves out of a hole in the past, let’s hope they manage to do it again, and avoid jumping back in two years later.