HTC in Big Trouble, No Value to Investors
Mobile device maker HTC, coming off a profitable Q1 2015, last week said it’s slipped back into the red in Q2, posting an operating loss of NT$5.1 billion ($161 million) and a net loss of NT$8.0 billion ($252 million) on sales of NT$33.0 billion ($1.04 billion).
Unfortunately, that’s the good news. The Taiwan manufacturer also is facing fallout from a 60 percent plunge in its stock value this year, with issues tumbling about 10 percent earlier this week to drive the company’s market value down to NT$47 billion ($1.5 billion), or below its NT$47.2 billion ($1.46 billion) cash on hand, Bloomberg reported.
That makes the device maker’s brand, factories and other assets aside from its cash worthless to investors.
“HTC’s cash is the only asset of value to shareholders,” Calvin Huang, a Sinopac Financial Holdings analyst, told Bloomberg. “Most of the other assets shouldn’t be considered in their valuation because there’s more write-offs to come and the brand has no value.”
The company isn’t forecasting brighter horizons for Q3, projecting revenue of NT$19 billion to NT$22 billion ($600 million to $695 million) for the period and an EPS loss of EPS NT$5.85 to NT$5.51.
HTC’s Q3 projections are about 48 percent below analysts’ estimates with most believing the company will not track to profitability at least through 2017, Bloomberg reported. As a measure of how far HTC has fallen, in 2011 its market cap stood at some NT$900 billion ($27.9 billion).
HTC chief financial officer Chialin Chang said the company will continue to cut operating costs, offer new devices to premium market segments and try to make hay on new ventures such as virtual reality.
Still, it remains to be seen if HTC can finding a lasting message that resonates with customers as competitors Lenovo, Huawei and Xiaomi have sprinted past perhaps not to be caught.
Bloomberg reported that Deutsche Bank analyst Birdy Lu posted a report dated August 7 contending that “HTC has little chance to compete with the iPhone and Samsung given limited resources, and might continue to lose shares to Chinese brands in mid/low-end segment.”
Nevertheless, regarding HTC’s Q2 results, HTC chairwoman and chief executive Cher Wang said even though the “current market climate is challenging, I firmly believe the measures we are putting in place to streamline our operations, improve efficiency and focus, and increase our momentum will start to show results over the coming quarters.”
The smart money is expecting another dismal quarter for HTC in Q3.