HTC turns to cheaper smartphones in search of profit

TAIPEI — Smarting from growing losses, Taiwanese phone maker HTC said it will expand its range of cheaper products as it fixes off-target marketing for its premium smartphones.

The company that has long prided itself as a purveyor of upscale products said it needed to sell more mid-tier and affordable smartphones after losing out last year. “The problem with us last year was that we only concentrated on our flagship. We missed a huge chunk of the mid-tier market,” co-founder and Chairperson Cher Wang told Reuters ahead of HTC’s earnings guidance presentation.

The company now plans to release products in the US$150 (S$190) to US$300 range for both emerging and developed markets, along with high-end phones that can sell for more than US$600, said HTC Chief Financial Officer Chialin Chang at the same interview.

Muscled off-track by fast-growing Chinese rivals such as Xiaomi as well as giants Samsung Electronics and Apple, HTC is seeking to reverse a two-year sales slump matched by an 80 per cent drop in its share price. The new strategy marks a need to address problems at a company that, just more than two years ago, supplied one in every 10 smartphones sold around the world. Last year, its global market share fell to only 2 per cent, according to Strategy Analytics analyst Neil Mawston. Last month, HTC reported its second straight quarter of operating losses.

HTC will need to move quickly to convince sceptical shareholders. “Only time will tell, but I’m not optimistic,” said Ms Laura Chen, a Taipei-based analyst at BNP Paribas. Ms Chen believes the company’s problem is unattractive, underwhelming products, and that this will continue to hold it back this year. “They don’t offer anything really new to the market,” said Ms Chen, who has a “Sell” rating on HTC shares.

Ms Wang also aims to boost smartphone sales this year by improving its marketing, something HTC “didn’t do well” last year. While the flagship HTC One phone launched last year attracted rave reviews, these did not translate to strong sales: HTC needs a “very aggressive campaign” to broaden its market beyond tech-savvy 20- to 30-year-olds, the executives said.

Last year, HTC hired Hollywood actor Robert Downey Jr for a series of TV ads to promote its brand in a campaign labelled “Here’s to Change”.

The executives said higher volumes of cheaper phones should make up for the difference in price with its higher-end phones. “Overall profitability is going to grow,” said Ms Wang.

HTC is also hoping for incremental growth in the high-end phone market this year. The latest version of the HTC One will be released next month with a larger screen and improved camera, Bloomberg News reported last month, citing unidentified sources.

HTC yesterday forecast a wider-than-expected loss and lowest quarterly sales since 2009. First-quarter loss per share will be NT$2.1 to NT$2.6, the company said in a statement, wider than the average NT$0.88 per share loss expected by analysts. A sales outlook of NT$34 billion (S$1.42 billion) to NT$36 billion is less than the NT$39.3 billion estimate by analysts.

Gross profit margin will be 21.5 per cent to 22 per cent this quarter, HTC said, compared with 17.8 per cent in the fourth quarter. AGENCIES