HTC shows 83% drop in profit as smartphone market demands diversity

Profits are dropping but an expansion of the HTC One range could bolster revenue

HTC president Jason Mackenzie shows the new HTC One during a launch event in New York, February 19, 2013. REUTERS/Brendan McDermid

Taiwanese smartphone and tablet manufacturer HTC have announced their revenue forecast for the second quarter of 2013, showing an 83 per cent drop in profits from last year.

Profits were NT$1.25bn (roughly £28m) from NT$70.7bn revenue. This is a substantial drop from the same quarter last year, where the revenue was NT$91.04bn giving profits of NT$7.4bn (roughly £164m).

HTC is struggling to stay afloat in a highly competitive smartphone market, with Apple and Samsung’s giant budget for advertising doing serious damage to the profile of HTC devices. A series of high-profile change amongst the executive level have also hurt the company.

Despite these falling profits, the company is still in the black, and certain industry commentators have been bullish about the latest reports. The Financial Times reported the news as “New flagship phone lifts struggling HTC”, whilst Engadget noted that at least the profits were an improvement upon the first quarter of 2013.

And it’s undeniable that where HTC has been successful is in the actual business of making phones. Their flagship device, the HTC One, received rapturous reviews across the media. PC Advisor called it “one of the best smartphones around” whilst Gizmodo declared it “one of the most exciting pieces of hardware we’ve seen in a long time” and “the best Android phone you’ll be able to buy for the foreseeable future.”

Unfortunately the critical acclaim did not translate directly into sales for HTC, especially when faced with Samsung’s wide-ranging portfolio of devices. The latest rumours are that a HTC One Mini and a HTC One Max are on the way to flesh out the company’s range –a pair of devices, one smaller than the One, and the other a tad larger. This would hopefully allow the company to compete with Samsung’s upcoming Galaxy S4 Mini and Apple’s cheaper iPhone, as well as phablet devices such as the Galaxy Note range.

HTC’s problems are not unique however, and the need to diversify is being felt by many companies on the market. As US and European markets reach saturation point regions such as China are becoming the main engines fuelling growth, demanding lower-cost smartphones rather than expensive, high-end models.