HTC's Money Woes Continue

August 20, 2015 by
htc-grip-and-htc-one-m9 - source: techcrunch

Last summer, hopes were high at HTC that a profitable second quarter was a sign of progress. Recent reports show it was not.

"Internet hyperbole (and financial analysis) have rendered HTC, a once high-flying mobile brand, essentially valueless," wrote TechCrunch's John Biggs (Aug. 10). "In short, the company is trading below cash on hand. So if you bought all HTC stock, the company would have to pay you, the buyer, to take it over. This means the companyís factories, stock and brand are worth nothing, at least on Wall Street."

Where's all the smartphone profit? Apple (92%) and Samsung (15%) ate up all of it and then some in Q1 2015.

And HTC isn't the only Android handset manufacturer having a hard time cutting a profit. Market leader Samsung is in the same boat. Biggs says the two companies are being hit by lower-end manufacturers right where it matters most: "price."

The profit gap between companies like these and Apple, on the other hand, is crazy. Last month, Canaccord Genuity reported Apple reaped 92% of the total profit from smartphone sales in Q1 2015, despite selling less than 20% of smartphones worldwide. Samsung accounted for 15% of profit (Canaccord says Apple and Samsung accounted for more than 100% of industry profits because other manufacturers either broke even, like BlackBerry, or lost money, like HTC, Lenovo and Microsoft) in the quarter.

"As the smartphone market matures and growth slows, it is starting to resemble the personal-computer business in some ways," wrote the Wall Street Journal's Shira Ovide and Daisuke Wakabayashi (July 12). "Average PC prices have plunged, and most manufacturers struggle to eke out profits. But Apple captured more than half of industry profits last year, even though its Mac line accounted for only about six of every 100 computers sold, according to Bernstein Research."

"Now it's iPhone and everyone else... Too many cell phones and too little profit make for a really bad business." - John Biggs, TechCrunch

TechCrunch's Biggs agrees: "Now itís iPhone and everyone else. The cell phone buyerís market is saturated. Even the upgrade cycles have grown longer. In short, people are holding onto their expensive phones longer or buying wildly cheap ones. There is no middle ground.

"HTC might be able to pull a Motorola and partially pull out of the nosedive, but, knowing the market for the average cell phone, Iím not holding my breath. Too many cell phones and too little profit make for a really bad business."

Posted in: HTC, Industry News