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HTC profits smacked by delayed launch of HTC One

The mobile phone maker was hit by a new low in profitability last quarter due to the delay of its new flagship phone.

The HTC One.
The HTC One. Sarah Tew/CNET

The late launch of the HTC One smartphone put a damper on HTC's first-quarter profits.

For the quarter ending in March, net profit plummeted to 85 million Taiwanese dollars ($2.85 million), a fall from 10.9 billion Taiwanese dollars ($363 million) a year ago and the company's lowest quarterly profit since 2004. Results also disappointed analysts polled by Thomson Reuters, who on average were expecting a net profit of 467.5 million Taiwanese dollars ($15.5 million).

Shipments for the new HTC One phone have been delayed due to a limited supply of cameras. Last month, HTC Chief Marketing Officer Benjamin Ho told The Wall Street Journal that the phone's camera was specifically designed for the company and "production cannot be ramped up so quickly."

But an unnamed HTC executive recently told the Journal that the company has had trouble getting components because it keeps changing its order estimates, following a drop in phone shipments. As a result, suppliers no longer consider HTC a "tier-one customer."

The delayed debut of the HTC One also bit into first-quarter revenues, which came in at 42.8 billion Taiwanese dollars, a drop from 67.7 billion a year ago. The amount was 22 percent below the estimate from investment firm Bernstein Research.

"As the company is in the middle of a product launch, lumpy monthly numbers can easily be explained by the phasing of product ramp ups and wind down, "Bernstein analyst Pierre Ferragu said in an investor's note today, "but such a low number likely reflects a significant further loss of traction in the market."

Any boost from the HTC One launch at this point may fail to live up to high expectations among analysts, Ferragu added. The supply problems also could trigger another bad quarter.

"HTC One is facing sourcing issues related to camera parts and metal casings, already leading to delays in delivery," the analyst said. "If these issues persist, the reality of second quarter sales could be even worse."

Adding to the supply problems is a smartphone market dominated by Apple and Samsung. The delay in HTC One shipments means that HTC wlll now compete directly with Samsung's Galaxy S4 for consumer dollars.

"We see the short-term evolution of HTC's sales under a significant risk of further weakening as the iPhone 5 ramps up and the confrontation between Samsung and Apple continues to monopolize visibility in distribution channels," Ferragu said. "Lastly, we see structural drivers to HTC's loss of traction: the company, despite strong product development capabilities and a high-quality brand, is now largely subscale compared to the two industry leaders."

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