UPDATE 1-HTC's profit surge slightly beats forecasts

Thu Jul 3, 2014 8:48am EDT

(Adds background, analyst comment)

* Q2 net T$2.26 billion vs forecast T$2.17 bln

* Rev T$65.06 bln vs guidance range T$65 bln-T$70 bln

TAIPEI, July 3 (Reuters) - Taiwanese smartphone maker HTC Corp on Thursday reported an 80 percent rise in second-quarter net profit from a year ago, slightly beating analyst expectations, as a turnaround strategy started to stem a decline in sales.

April-June net profit reached T$2.26 billion ($75 million) versus a T$2.17 billion mean estimate of 17 analysts polled by Reuters.

The result compared with a T$1.88 billion loss in the previous three months and T$1.25 billion profit in the same quarter a year earlier.

HTC has struggled to retain its market share against competition from the likes of Apple Inc and Samsung Electronics Co Ltd, as growth in high-end smartphones slows worldwide.

To return its global share to 10 percent from the current 2 percent, HTC has released flagship model One M8, extended its range of mid-tier handsets and increased its marketing budget.

Revenue was T$65.06 billion in the second quarter, compared with a guidance range of between T$65 billion and T$70 billion given in May.

Shares of HTC ended up 0.4 percent ahead of the earnings release, in line with a rise in the benchmark index.

Global growth in smartphone sales is likely to be 23 percent this year, against 39 percent last year, according to researcher IDC. Average growth from 2013 to 2018 will be 12.3 percent, IDC said.

The prospect puts increasing pressure on high-end smartphone makers to establish distinctive brands, which some analysts say HTC has struggled to do.

The likely release in coming months of a new iPhone from Apple as well as and the proliferation of low-priced feature-packed models in China will add to HTC's challenges, said analyst Richard Ko of KGI Securities.

Only significant inroads in a new product category such as wearable devices - where HTC plans to partner Google Inc - could bring the company the high-growth rates experienced just a few years ago, Ko said.

"Every year there's a new 'hero' product release and a quarterly uptick, but it often fizzles quickly," Ko said ahead of the earnings release, referring to the March launch of the One M8. "This year the competition is even more fierce." (Reporting by Faith Hung and Michael Gold; Editing by David Holmes)

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