HTC just released its quarterly results for the second quarter of 2013. Unfortunately… things are not looking up. The company only made about 1.5% gross operating margin profit on its revenue of about $2.36 billion. Those are slim profits, but profit nonetheless. Still, the trend continues to be downward for HTC, and it looks like things won’t improve in the third quarter of 2013.
According to the company’s Q3 outlook, there will be between 0% and -8% in gross operating income, meaning they either break even or take a loss. This would be the first time such a thing has happened for the Taiwanese manufacturer, which some might assume spells bad news for the future of its smartphone business.
HTC says the bulk of its losses will come from the need to clear channels of older products:
Our overall gross margin has been impacted by the relatively higher cost structure, lack of economy of scale and certain provisions needed to facilitate the clearance of aging products in the channel.
That said, 4th quarter results are expected to be better. HTC says it plans to get the ball rolling by bringing more competitive devices for the mid-tier space, and we already know of the first device set to take the reigns in that channel. It’s the HTC One Mini, though the company’s wording makes it sound like it’s going to take a lot more than that to stay in the ring with the big boys.
When HTC introduced its new strategy for 2013, the company emphasized the importance of focusing on “one” device — or, at least, one family of devices. For all intents and purposes, the company has slowed it down and shaven a lot of extra weight off of its cumbersome portfolio. And while HTC never completely abandoned the emerging devices market — particularly with the continuation of the entry-level Desire line — it definitely hasn’t been pushed quite as heavily as it once was.
The only question is whether or not these financial woes will force HTC’s hand and make the OEM slip back into its old ways. When it comes to consumer satisfaction and brand image, it’s easy to want to do the right thing, but the company can’t continue to exist if it can’t make any money. We’ll just have to accept the trade-offs necessary to keep another competitor in the market.