HTC, one of the world’s leading manufacturers of devices operating on Google‘s (NASDAQ:GOOG) Android platform, forecast a disappointing fourth quarter and offered equally bleak predictions for its first-quarter performance. The Taiwan-based company calls the setbacks temporary, the result of a competitive smartphone market and dwindling demand, and hopes to rebound following the preview of four new devices at the Mobile World Congress, an industry trade show scheduled for Feb. 27 through March 1 in Barcelona.
Revenue will be down 2.5% in the fourth-quarter to $3.4 billion ($102.4 billion in New Taiwan dollars), with earnings per share of 44 cents, the company says. Those figures fall slightly under analyst estimates of $3.66 billion and 48 cents per share. Revenue also will underperform compared to the $3.5 billion that HTC had predicted earlier after slashing its fourth-quarter outlook.
HTC’s forecast for the first quarter, currently underway, includes revenue of $2.1 billion to $2.36 billion; analyst estimates came in at $2.96 billion. Sales in January fell almost 53% to $561 million. Shares of HTC fell $1.01 from Saturday’s close, or 5%, to $18.60 before the report was released.
Promise in the new product line
HTC hopes that its new devices will help cure the sales slump. Leaks have revealed that two of the debuting products are likely to be the HTC Ville and the HTC Edge. The Ville will be a midrange smartphone operating on the Android 4.0 operating system, nicknamed Ice Cream Sandwich. The powerhouse Edge, featuring trendy quad-core processors, is expected to have a screen display and multifunction camera to rival that of Apple‘s (NASDAQ:AAPL) iPhone.
These products might not be enough to stop the revenue leak. HTC started out strong, manufacturing the HTC Dream, the first readily available Android device, before partnering with Google to create the Nexus One. Future Nexus devices went to Samsung (PINK:SSNLF) for manufacturing, although as of last fall HTC was still the leading manufacturer for smartphones purchased in the U.S.
According to an IDC report, the U.S. smartphone market grew 6.1% year-over-year for the fourth quarter. That figure is less optimistic than it looks: the iPhone 4S shipped out during the fourth quarter, bolstering the results, and the jump was still lower than the 9.3% increase in the third quarter. Demand has shrunk and driven up competition. Samsung has plowed ahead to take HTC’s spot as the market leader but Apple is close on its heels with its ubiquitous iPhone.
The success of HTC is ultimately in the hands of consumers. The HTC Ville has the best chance of creating a tech commotion that could serve as a strong flagship product for the company. Word of mouth following the Mobile World Congress could make or break the product launches that HTC so desperately needs.