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New products unlikely to launch HTC out of losses: brokerage

2013/10/07 12:20:46

HTC One mini.

Taipei, Oct. 7 (CNA) Taiwan's HTC Corp. is expected to remain in red going into the first quarter of next year despite its launch this year of new smartphone models, according to the Hong Kong-based brokerage CLSA Ltd.

The Taoyuan-based phone maker launched its 4.3-inch HTC One mini in July, while its first phablet, the 5.9-inch HTC One Max, is expected to be released later this month, the brokerage firm said.

But the flagship One series failed to boost HTC's financial results, as the company's third quarter sales declined 33 percent from a year earlier to NT$47 billion (US$1.6 billion), missing its guidance of NT$50 billion-NT$60 billion and leading to its first quarterly net loss since 2001.

"With fierce competition from the iPhone 5S/5C, Galaxy Note 3 and Chinese handsets, we expect HTC to remain in losses for the next two quarters," Taipei-based CLSA analyst CK Cheng wrote in a research note.

"Chinese makers arguably may view HTC as an attractive takeover target, but such a deal would be politically unpalatable for HTC's board," Cheng said. He gave a "sell" rating on HTC shares and cut his price target from NT$93 to NT$91.

Goldman Sachs maintained a "sell" rating and trimmed the stock's price target from NT$86 to NT$80, saying HTC is still facing unprecedented challenges.

"HTC is going through a substantial reshuffle in management and regional leadership teams, trying to resolve internal bottlenecks such as poor execution, unclear sales/marketing strategies, and lack of efficiency in responding to changing market dynamics," said Robert Yen, a Goldman Sachs analyst in Taipei.

"Overly focusing on product superiority with little sensitivity to execution details seems to be the key bottleneck in our view, and we still see no sign of light at the end of the tunnel," Yen said.

Meanwhile, BNP Paribas Securities kept its "reduce" rating on HTC with a NT$71 price target, forecasting a more challenging outlook for HTC due to its worsening shipments, fierce competition, a lack of product differentiation and unattractive pricing.

The brokerage also lowered its estimates for HTC's annual shipments for 2013 from 24 million units to 20.5 million units and for 2014 from 22.2 million units to 10.7 million units.

It forecast a further drop in HTC's gross margin from 20.8 percent this year to 17.6 percent next year.

North America will remain HTC's biggest market this year, making up 40.4 percent of the company's total revenue, while Europe will account for 27 percent, and Asia and the rest of the world 32.6 percent, BNP Paribas said.

HTC shares had fallen 4.44 percent to NT$129 on the local bourse as of 11 a.m. Monday

(By Jeffrey Wu)