Technolgy Rules: HTC had a terrible holiday quarter

Monday, March 26, 2018

HTC had a terrible holiday quarter

Smartphone and VR headset maker HTC has published its consolidated results for Q4 2017 — and it makes for grim reading.

The topline figures are:

Flat quarterly revenue of NT$15.7 billion (~$540M) with gross margin of -30.8%
Quarterly operating loss of NT$9.6 billion (~$330M) with operating margin of -60.8%
Quarterly net loss after tax: NT$9.8 billion (~$337M), or -NT$11.93 (-$0.41) per share

HTC says this latest quarterly loss was due to “market competition, product mix, pricing, and recognized inventory write-downs”. So pretty much a full house of operational and business problems.

The one bright spot for HTC’s business is a deal worth $1.1BN, in which Google acquired a chunk of HTC’s hardware business — which was completed at the end of January.

That one-off cash injection is not reflected in the Q4 results but will rather give some passing uplift to HTC’s Q1 2018 results.

HTC says it will be using the Google windfall for “greater investment in emerging technologies”, writing that they will be “vital across all of our businesses and present significant long-term growth opportunities”.

There’s no doubt that any business revival would require hefty investment. But exactly what long-term growth opportunities HTC believes it can capture is questionable, given how fiercely competitive the smartphone market continues to be (with Chinese OEMs making what running there is in a shrinking global market); and how the VR market — which HTC bet big on in 2015, with Vive and Valve, to try to diversify beyond mobile — has hardly turned out to be the next major computing paradigm. Not yet anyway.

So the emphasis really is on the “long-term” earning potential of VR — say five or even ten years hence.

HTC flags the launch of its VIVE Focus standalone VR system in China — which it last week said it would also be bringing to the UK and other global markets later this year — and the launch of a VIVE Pro premium PC VR system in January, which it was showing off at CES, as examples of focused product innovation in the VR space.

Following a strategic business review aimed at optimizing its teams and processes — both for smartphones and VR — it also says it now has “a series of measures in place to enable stronger execution”, and is touting fresh innovations coming across its markets this year.

But HTC is going to need a whole lot more than squeezable gimmicks and shiny finishes to lift out of these doldrums.