HTC shares plunge after bad July sales report, Q2 results

Taipei, Shares of Taiwan-based smartphone brand HTC Corp. took a beating Tuesday morning after the company reported a day earlier that July sales plunged 70 percent from a year earlier and 30 percent from the previous month, dealers said.

Selling was also triggered by another report that HTC posted a second-quarter loss because of the lack of non-core business gains that helped it post a profit in the first quarter, dealers said.

As of 11:47 a.m. shares of HTC had lost 6.50 percent to NT$51.80 (US$1.70), with 8.51 million shares changing hands on the Taiwan Stock Exchange, where the benchmark weighted index was down 0.22 percent at 10,999.35.

The stock came under heavy pressure soon after the market opened, and selling escalated to push its price even lower.

"Investors were shocked by the weak sales report for July," Xincheng International Investment Consulting analyst Chang Chih-cheng said.

"The sales data is further evidence that HTC remains stuck in fierce competition in the global smartphone market, and there is no sign it will come out of the doldrums anytime soon."

In a statement released Monday, HTC reported consolidated sales for July of NT$1.4 billion, down 77.41 percent from a year earlier and also down 37.26 percent from a month earlier.

The July figure was the lowest since August 2003, when the company's revenue was NT$1.33 billion.

In the first seven months of this year, HTC's consolidated sales were down 53.98 percent year-on-year to NT$16.96 billion.

"The steep drop in sales resulted from the company's decision to lay off about a quarter of its global workforce," Chang said. "The layoff has hurt HTC's production and R&D capabilities."

In early July, HTC announced it would lay off 1,500 employees to optimize the company's resources through a "strategic adjustment of its workforce."

The 1,500 employees who will be affected are mostly part of the company's manufacturing operations in Taiwan, and the layoffs are scheduled to be completed by the end of September, HTC said.

Analysts said HTC's efforts in virtual reality development, which account for only a small fraction of its total revenue, failed to give a boost to July sales.

In addition, HTC said it incurred a NT$2.09 billion net loss, or a loss of NT$2.53 per share in the second quarter, compared with NT$25.70 in earnings per share for the first quarter.

"The first quarter profit totally resulted from its disposal of its smartphone ODM assets to Google (for US$1 billion), and again it returned to a loss in the second quarter," Chang said.

But HTC said its operating losses for the April-June period fell to NT$3.4 billion from the first quarter's operating loss of NT$4.9 billion.

HTC has said it will continue to launch new smartphone models in the third quarter in a bid to attract buying interest.

Source: Focus Taiwan News Channel