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HTC continues to prove unprofitable as sales dwindle

Third-quarter financial results show the Taiwanese smartphone maker struggling both with the big names and the upstart Chinese device makers.

HTC's sales figures have been slowly declining for four years. HTC

HTC's poor smartphone sales and ongoing struggle in a hotly competitive market have resulted in its second net loss this year, the company reported Monday.

The Taiwanese phone maker managed to cling to a tiny profit in the first quarter this year, but a downturn in sales contributed to a loss of $138 million (NT$4.48 billion) for the third quarter.

The company's results show how hard it is to succeed financially in a world where so many smartphones powered by Google's Android operating system are available. Not that long ago, HTC was the world's top smartphone maker by volume, and Google tapped it to build the first Android-powered phone, the G1. It crafted acclaimed devices that found favor with customers and critics alike.

But HTC's sales figures have been slowly declining for four years as it struggles to establish its brand and business while competing with giants like Apple and Samsung. Also, Chinese upstarts Huawei, Xiaomi and Lenovo have only made competition harder.

A year ago, the company was still able to post a net profit, albeit a small one at just $19.7 million (NT$0.64 billion). Revenue has fallen by nearly half compared to the same period in 2014, from $1.29 billion (NT$41.9 billion) to $658 million (NT$21.4 billion).

"HTC's results come as little surprise," said Ben Wood, chief of research at CCS Insight. "Its smartphone business has deteriorated dramatically over the last few quarters. The competitive intensity of the market, the dominance of Apple and the ascendancy of Chinese phone makers have all taken their toll."

Shares slumped 10 percent when the company reported its first net loss of the year in June. In September, HTC was dropped from Taiwan's Top 50 index, a list of companies boasting the most highly valued Taiwanese stock. The company said in August that it would lay off 15 percent of its workforce and slash operating costs by 35 percent.

A slew of new devices, including this year's flagship, the One M9, haven't reversed the former titan's fortunes. In 2011, the company boasted a 10.7 percent share of the global smartphone market, but some estimates now put it at less than 2 percent.

Existing HTC One models won plaudits for bringing a high-end feel to the Android phone market, but buyers still gravitated mostly to Samsung, which embraced the premium strategy this year with its Galaxy S6 models. Next up for HTC, according to recent leaks, will be a model called the HTC One A9. The company is also experimenting with new technologies beyond smartphones, partnering with games company Valve on a virtual-reality headset, the HTC Vive.

"It's hard to see how HTC can turn around its fortunes in smartphones given the tough competitive environment," said Wood. "It will be hoping its investments in other areas such as virtual reality will help drive new lines of business to get the company back on track."

HTC declined to comment.