HTC has strong first quarter, but Q2 looks like a downer

HTC says that its revenue was up 25 percent in the first quarter, but its forecasts are not encouraging.

Don Reisinger
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger
3 min read

HTC CEO Cher Wang talking about the company's efforts beyond mobile. Lynn La/CNET

HTC, the embattled handset maker that's trying to reinvent itself with help from its newly appointed CEO Cher Wang shared a bit of a mixed bag with investors on Wednesday.

HTC posted revenue during the first quarter of 2015 of NT$41.5 billion ($1.4 billion) -- representing a 25 percent increase in revenue over the same period last year. The company also posted its strongest US revenue growth since 2011.

In a statement, HTC, which also posted a small profit of NT$360 million, said that its success was due in large part to offering "tailored portfolios" of products to different markets around the world. According to that strategy, emerging markets, for example, will receive more affordable smartphones and fewer higher-end devices than developed countries.

The success in the first quarter, however, might be short-lived. HTC said that its revenue for the second quarter ending June 30 will fall between NT$46 billion and NT$51 billion. Depending on where HTC's revenue stands in that range, that would mean a decline of between 22 percent and 29 percent compared to the second quarter of 2014 when it posted revenue of NT$65.1 billion.

The forecast comes at a crucial time for HTC. The company, whose phones a few years ago had some momentum in the US, has watched its market share fall off a cliff. At last count, the company had approximately 2 percent market share in the worldwide smartphone space as Apple, Samsung and a handful of China-based handset makers, including Xiaomi, offer more appealing products. Such products include Apple's popular iPhone 6, which helped propel the company to 61.2 million unit sales in the last quarter. Meanwhile, Samsung's Galaxy S6 and the recently announced LG G4 have also caught the eyes of consumers.

Some investors had hoped for a stronger second quarter due to the release of HTC's latest flagship handset, the One M9. However, reviewers have been critical of the device, saying that it's a small upgrade over the previous model, the HTC One M8. CNET's Reviews team took the M9 for a spin, and while it received a solid 8 out of 10, they argued that the handset "doesn't exceed the competition where it counts."

But HTC might not be as concerned about its success in smartphones as it once was. Last month, HTC chairwoman and co-founder Cher Wang took over as the company's CEO, replacing fellow co-founder Peter Chou. Wang has said that while HTC will not abandon smartphones, the company will attempt to capitalize on other growth areas it sees, including wearables. Wang also wants to target specific markets with products tailored to them.

In a statement accompanying her company's financials on Wednesday, Wang focused on HTC's prospects in areas outside of smartphones. "We have made strides in expanding our product offerings into new connected smart devices in areas such as fitness and entertainment," Wang said. "It is vital that we drive the connected lifestyle through our pursuit of brilliance and by engaging strategic partners to bring the best and most innovative products to market."

Still, questions remain over whether Wang can actually help HTC. Wang was, after all, the chairwoman at the company while its troubles persisted and despite replacing Chou, he's still running the company's Future Labs, working on next-generation technologies. So, while there has been a shake-up at the top, the same players are in different positions, causing analysts and investors to wonder if HTC can be fixed.

"It remains to be seen whether Cher Wang is the right person to get HTC back on track," Ben Wood, an analyst at CCS Insight, told CNET last month. "HTC has a very tough year ahead."

Based on what HTC is predicting for the second quarter, Wood's comments already seem prescient.

HTC did not immediately respond to a request for comment.