UPDATE 1-Smartphone maker HTC cuts sales target

Wed Jun 6, 2012 9:47am EDT

* Cut Q2 sales target by 13.3 pct

* Business in China better than expected

By Clare Jim

TAIPEI, June 6 (Reuters) - Taiwanese smartphone maker HTC Corp cut its second-quarter revenue target, citing lower-than-anticipated sales to Europe and delayed product sales in the United States, while China is doing better-than-expected, it said.

The world's No.5 smartphone vendor suffered a rapid fall from grace in the second half of last year as its phones failed to keep up with Apple's iPhones and Samsung's Galaxy range, after sales had grown four-fold and shares more than tripled in the 1-1/2 years since 2010.

It cut its second-quarter revenue target by 13.3 percent on Wednesday.

"A bigger softness is from Europe than the U.S.," chief financial officer Chia-Lin Chang told an analyst telephone conference, blaming the macroeconomic situation and intensified competition in that region.

In the U.S., HTC experienced a delay in sales of two new smartphones, the HTC One X and HTC EVO 4G LTE, for around two weeks last month due to a requirement for customs inspections after losing a patent dispute with Apple.

"But sales in China are better than we thought; we expect China will contribute a representative percentage to the revenue this quarter," Chang added.

HTC cut its second-quarter revenue target to T$91 billion ($3.03 billion) from T$105 billion, compared to T$67.79 billion in the first quarter. It also revised down its operating margin forecast by 2 percentage points to 9 percent, but kept gross margin at 27 percent.

The revision includes a one-time charge of T$2.6 billion to facilitate the clearance of inventory for certain products shipped from last year, an HTC statement showed. Without the charge, the revenue would have been T$93.6 billion.

"Given all the things happening in the second quarter here, we certainly hope we can get the right guidance and have a more smooth transition going forward," Chang said.

But analysts said the cut in forecast overshadowed the outlook for the second half of the year for both HTC and the whole industry.

"If the reason is more because of the macro concern, then it's not in the control of the company, no matter how good its products are," said Bonnie Chang, an analyst from Yuanta Securities. "It can even affect the business of Apple."

HTC's consolidated sales for May were T$30 billion, down 26.13 percent from the same month a year earlier.

HTC reported a 70 percent tumble in net profit in the first quarter to T$4.464 billion ($151.5 million), just below forecasts.

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