HTC shares tumble to 10-year low

<p>The smartphone maker forecasts higher-than-expected losses.</p>

HTC shares tumbled 10 per cent today (August 7th) – the daily limit – after the company issued a forecast for a loss five times higher than estimates. Shares were down NT$63 (£1.3) in Taipei at the end of the day, closing at their lowest in more than ten years. 

The smartphone maker’s third-quarter loss will be NT$5.51 to NT$5.85 per share, compared with analysts' forecasts of a loss of NT$1.17 per share. Meanwhile, the company said that sales this quarter will stand between NT$19 billion and NT$22 billion, compared with estimates for NT$36.8 billion. 

“HTC’s multiple model strategy in the past year did not work as planned,” JPMorgan Chase & Co. analyst Narci Chang told Bloomberg. “HTC’s current business model needs a significant makeover.”

Increased global competition

The disappointing results were triggered by "weaker than expected demand at the high end along with weak sales in China", the firm said in a statement. The company is struggling with competition from Apple, Samsung and Chinese rivals.

HTC said it won’t consider mergers, and announced plans to cut staff, reduce spending and trim its product catalogue.

The company's chief financial officer, Chang Chialin, said that HTC will change its product strategy to produce fewer models over longer time intervals while focusing on a greater share of industry profits instead of shipments. He added that cost reductions will start this quarter, with the result of those cuts reflecting in the first quarter of 2016.

However, Anne Lee, an analyst at Nomura who has a sell rating on the stock, told the Financial Times a near-term turnaround was unlikely. "We remain cautious and believe it is challenging for second-tier smartphone brands to remain competitive and turn a profit in a slow smartphone market," she said.

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