HTC Reports Operating Loss Of More Than $100 Million For Q3 2013, First Time In Its History

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HTC One
A sales girl displays the new HTC One mobile phone during the first day of public sales at Taman Anggrek Mall in Jakarta on June 8, 2013.

For the very first time in its history and, as foreseen, Taiwanese smartphone maker HTC (TPE:2498) has suffered an operating loss in the third quarter of 2013, despite strong sales of its flagship HTC One handset.

On Thursday, HTC reported an operating loss of $101.3 million with a total third quarter revenue of $1.6 billion, which was less than last year’s revenue of $2.35 billion with an operating income of $42 million and earnings per share of 5 cents. The company had warned of the possibility of such an outcome in July.

Here is how the financials for the third quarter break down:

Total revenues of $1.6 billion (NT$47.05 billion)

Operating loss before tax of $119.4 million (NT$3.50 billion)

Operating loss after tax of $101.3 million (NT$2.97 billion)

Earnings per share after tax of -$0.12 (-NT$3.58)

While releasing its second quarter results in July, HTC had predicted an operating margin of between 0 percent and -8 percent for the third quarter of this year, suggesting that it could face an operating loss during the period.

“Our overall gross margin has been impacted by the relatively higher cost structure, lack of economy of scale and certain provisions needed to facilitate the clearance of aging products in the channel,” the company said at the time. “Actions have been taken and we expect to see improvement in Q4.”

Reuters reported last week that HTC was facing supply constraints on its latest smartphone, the HTC One Mini, which was launched in mid-July. The reported cited an unidentified source as saying that demand for the handset from consumers and telecom companies could not be met at the moment while some analysts estimate that only about 200,000 units of the HTC One Mini are expected to be shipped each month.

HTC said in July that it would release more competitive mid-range products in coming months, and expressed hope that the new products would help the company “regain momentum and market share in these segments in Q4.”

According to rumors, the company may launch a bigger version of the HTC One, dubbed the HTC One Max, in the fourth quarter of 2013.

The new handset, which is expected to be HTC’s offering for the holiday season, is likely to face some serious competition from rival products, such as Samsung’s (KRX:005935) Galaxy Note 3, Sony’s (NYSE:SNE) Xperia Z Ultra, and Nokia’s (NYSE:NOK) unannounced smartphone, Lumia 1520.

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