UPDATE 1-HTC fourth-quarter profit below expectations

TAIPEI Sun Jan 5, 2014 2:59am EST

TAIPEI Jan 6 (Reuters) - Taiwanese smartphone maker HTC reported a worse than expected net fourth-quarter profit on Sunday, despite aggressive cost cutting and a one-time gain.

The company reported net profit of T$0.3 billion ($10 million), compared to a net loss of T$2.97 billion ($99.9 million) in the previous quarter and profit of T$1.01 billion ($34 million) in the same quarter of 2012.

The figure lags expected net profit of T$721.71 million ($24.3 million), according to Thomson Reuters I/B/E/S.

The number highlights how quickly problems have piled up at a company that just over two years ago supplied one in every 10 smartphones sold around the world.

The company, which has lost nearly three-quarter of its market value in the last two years, is now worth about $4 billion, dwarfed by rivals like Apple and Samsung Electronics Co Ltd.

New management installed in the last quarter to tackle that slide must persuade customers the brand can still stand for stylish, feature-loaded phones, while keeping a lid on development costs.

Despite its latest flagship product, the HTC One, garnering rave reviews, the company's global share of the smartphone market has declined to a mere 2.2 percent in the third quarter of 2013 from a peak of 10.3 percent in the third quarter of 2011, data from research firm Gartner show.

While the company's recent "Here's To Change" campaign has seen an advertising revamp featuring "Iron Man" star Robert Downey Jr., analysts remain skeptical about the firm's ability to differentiate its brand image in a highly-saturated playing field.

The company has embarked on a cost-cutting campaign that includes buying its chips from cheaper vendors and outsourcing production. It also sold its stake in headphone brand Beats Electronics LLC, booking a one-time pre-tax profit of T$2.5 billion ($85 million), which would be recorded in the fourth quarter.

Shuttered factories, a wave of executive departures and top-level reshuffling are symptoms of what industry insiders see as the company's biggest problem: connecting with consumers.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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