After a string of weak quarters, mobile phone maker HTC is eyeing more of the same for the current quarter but is hoping for better results next year.
The Taiwan-based company expects sales for the fourth quarter to drop to between 40 billion and 42 billion Taiwan dollars (between $1.23 billion and $1.3 billion), around 15 percent lower than in last year's fourth quarter.
Competition from other smartphones, especially the iPhone 3GS released this summer, has tempered demand for HTC's products, which include the Hero, Droid Eris, Tilt 2, MyTouch 3G, Snap, and Ozone.
HTC's (from left) Hero, Droid Eris, Tilt 2, and Pure.
(Credit: HTC)Prices on smartphones have also dropped this year and are likely to continue to fall, putting further pressure on HTC, which trails the market in fourth place behind Nokia, Apple, and Research In Motion.
The company's third quarter continued its down streak, with full results reported earlier this week. For the quarter the ended September 30, HTC watched its sales drop 10 percent to 34.01 billion Taiwan dollars from last year's third quarter. Earnings fell 18.5 percent to 5.7 billion Taiwan dollars.
In a conference call this week, HTC outlined its current business and forecast for the near term. The U.S. market for HTC 's Android smartphones has enjoyed strong growth, the company said, but European sales remain sluggish due to a lack of brand awareness.
Market researcher IDC recently reported that HTC sold 2.4 million smartphones in the third quarter, a gain of 14.7 percent over last year's third quarter. But Android sales for that quarter were lower than expected, mostly due to tougher competition from other manufacturers and are likely to stay down in the fourth quarter.
The company has been striving to increase consumer awareness of its brand in both the U.S. and Europe, a goal it plans to push further next year by boosting its marketing budget.
For the holiday-shopping season, HTC will be trying to grab more shelf space and sales for its new Android Hero smartphone, released last month. Beyond that, the company is looking for strong sales volume from its overall line of Android smartphones, including the G1, Magic, Tattoo, and the new Droid Eris.
Despite its new focus on Google's Android operating system, HTC said that its Windows Mobile phones remain vital products. The company still ships more Windows Mobile smartphones than any other manufacturer and is looking to enhance their performance and touch capabilities in the near term. Hitting U.S. shores next year will be the new HD2 Windows Mobile smartphone, which has already had positive reviews.
Cisco Systems reported fiscal first-quarter earnings that beat expectations with good sequential growth, giving hope that the ailing economy is on the upswing.
The network equipment maker on Wednesday reported that fiscal first-quarter profits and revenue that were down from the same quarter a year ago but up from the previous quarter.
Cisco reported a quarterly profit of $1.8 billion, or 36 cents a share, compared with a profit of $2.2 billion, or 42 cents a share, for the same quarter a year ago. Revenue for the first fiscal quarter in 2009 was $9 billion, down from $10.3 billion during the same quarter a year prior.
Analysts had expected Cisco to report earnings of 31 cents a share on revenue of $8.75 billion, according to Thomson Reuters.
Even though revenue and earnings were lower than a year ago, Cisco grew revenue and earnings, compared to the previous quarter. In the fiscal fourth quarter, Cisco reported profits of $1.1 billion, or 19 cents a share. And it reported revenue of $8.5 billion.
Cisco CEO John Chambers commented on the company's strong sequential growth, saying the gains are a good indication that economy is in recovery.
"Building off what we saw as a clear tipping point in (the fourth quarter), our (first-quarter) results continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times," he said in a statement. "We view the improving economic outlook, combined with solid execution on our growth strategy, as creating unparalleled opportunity to drive more value into the core of the network."
Helped by cost cuts and by growth in Internet and phone subscribers, Comcast on Wednesday reported a 22 percent jump in earnings for its third quarter.
The cable provider saw net income of $944 million, or 33 cents per share, for the quarter ended Sept. 30, compared with $771 million (26 cents per share) in the year-ago quarter. Sales also rose, hitting $8.8 billion, up from $8.5 billion in 2008's third quarter, though revenue was slightly below analysts' estimates.
For the quarter, the number of TV subscribers dropped 2.7 percent to 23.7 million from 24.4 million a year ago. But the loss was more than offset by gains in Internet and voice, two services that Comcast has marketed heavily, especially as part of its Triple-Play service.
The number of Internet subscribers rose 6.4 percent to 15.6 million, while Comcast phone customers jumped 20 percent to 7.3 million. Overall, the company saw a quarterly increase in customers of 3.4 percent to 46.8 million. Subscriber growth helped boost third-quarter sales for the cable segment by 2.8 percent to $8.4 billion.
With a focus on trimming costs, capital expenses declined 6.1 percent to $1.2 billion, due in large part to lower spending at the company's cable divison.
"The strength and resilience of our businesses combined with our continued emphasis on expenses and prudent capital management helped us achieve healthy operating and financial results in the third quarter," Brian Roberts, chairman and chief executive officer, said in a statement.
Comcast revealed no new details over its intent to acquire a leading stake in GE-owned NBC Universal. Early last month, reports surfaced that the company wanted to buy a 51 percent chunk of NBCU, with GE owning the rest, to create a new joint venture. If it goes through, the deal could transform Comcast into a major media powerhouse, with control of NBC as well as variety of TV networks and cable stations.
Updated 8:32 a.m. PDT with information from the conference call.
Sprint Nextel is still losing customers, the company said Thursday as it reported a third-quarter loss.
Sprint's losses widened to $478 million, or 17 cents a share, during the quarter that ended September 30, from a loss of $326 million, or 11 cents a share, a year earlier. Revenue fell nearly 9 percent to $8.04 billion.
Results were slightly worse than analysts had expected. Analysts had been looking for Sprint to report a loss of 15 cents per share on revenue of $8.09 billion.
Sprint continued to lose customers, as it has for several quarters. But it lost fewer customers than analysts had expected. Sprint lost a total of 801,000 subscribers in the quarter. Analysts had expected the company to lose 870,000 so-called post-paid customers.
Meanwhile, Sprint competitors AT&T and Verizon Wireless added 2 million and 1.2 million customers, respectively.
That said, Sprint lost fewer customers than it has in the past quarters of 2009. In the second quarter it lost 991,000 subscribers and in the first quarter it lost 1.25 million. And Sprint's CEO Dan Hesse said during the conference call that he saw even more improvement toward the end of the third quarter due to a new service plan called Any Mobile, Anytime. This plan, which starts at $69.99 per month, allows subscribers to call any cell phone in the U.S., regardless of the carrier. The plan also comes with Sprint's Simply Everything Data plan, which includes unlimited text messaging and data services. Subscribers also get 450 voice minutes for calls to landlines.
Sprint CEO Dan Hesse
(Credit: Sprint)Sprint's churn rate, or the rate at which customers dump its service, was 2.17 percent, up from 2.05 percent in the second quarter.
"We finished the quarter stronger than started it with the launch of Any Mobile, Anytime," Hesse said. "So the trajectory leaving the third quarter did improve. We are hoping that this will help us keep the base of people on our Simply Everything plans and get customers to migrate. So we think it will make a difference in churn."
Hesse explained that before Sprint launched its Simply Everything plans, which bundle, data and voice services into one flat price, its highest churn came from the customers who spent the most money every month. After it launched the Simply Everything plan, it reduced churn of these valuable customers. And now the highest churn rate are among customers who spend less money per month on services.
"We know these plans make a difference," he said. "And we are moving down the rate card, hoping to improve churn and our brand."
These new plans may help with reducing churn, but it hasn't helped the company grow average revenues per customer. In fact, customers with contracts spent on average $56 a month, about the same as they've spent for the last several quarters. Data revenue accounted for almost 30 percent of that.
Reducing churn is critical for Sprint, but Hesse also noted that it's important for the company to add new customers as well. In an effort to keep customers, Sprint has added a new touch-screen Google Android phone, the HTC Hero. And it will soon add another Google Android phone, the Samsung Moment to its line-up. It is also the exclusive carrier for the Palm Pre, at least until the end of 2009. It will add the Palm Pixi to its lineup later next month. And it has launched new BlackBerry devices, including the BlackBerry Tour.
Hesse said it is important for the company to have a strong lineup of phones to compete against rivals, such as AT&T and Verizon Wireless. But adding smartphones comes at a price. In order to make devices more affordable to consumers, Sprint said it paid about $950 million to subsidize equipment, which includes high-end smartphones. A year ago it spent $700 million on equipment subsidies.
'Doubling-down' on prepaid
"Competition is getting tougher among postpaid competitors as we all go after each other's base of customers for growth," he said. "But that is why we are also doubling down on our prepaid business. Because we think there is more growth there."
Indeed, Sprint did much better in the third quarter adding prepaid customers than it did adding new postpaid, contract customers. Much of this growth was helped by Sprint's Boost Mobile brand, which includes unlimited calls and texting for a $50 a month. Sprint added about 666,000 prepaid users.
Hesse said he expects the Virgin Mobile USA service, which Sprint acquired in July, to also help grow this business. The Virgin service uses Sprint's CDMA network, while Boost uses the company's iDEN network.
"We are looking to prepaid service as a potential growth engine," he said. "But still intend to get postpaid back to growth, and to do that we must focus on churn, but we also have to add customers. You can't win the game with just defense. You need to have a two-pronged attack."
But analysts and investors question this strategy. They worry that Sprint is becoming too dependent on prepaid customers, a business which has typically been less profitable than the postpaid market.
Hesse also said he was hopeful that the company's investment in 4G wireless will begin paying off in 2010 and beyond. The company has partnered with Clearwire to build a nationwide 4G wireless network using WiMax technology. The network is already up and running in 17 markets. And Sprint is offering a dual mode 3G/4G service that provides full nationwide coverage to wireless customers today.
"Another important area of growth is in 3G and 4G data," he said. "And I think the industry's best days are ahead."
Beleaguered handset maker Motorola on Thursday had some good news to offer investors, reporting a small profit for the third quarter.
For the three months ended October 3, Motorola reported net income of $12 million, or a penny per share, compared with a loss of $397 million (and a loss of 18 cents per share) for the year-ago period.
Revenue, however, was down year over year, coming in at $5.45 billion for the third quarter of 2009, versus $7.48 billion in the same quarter of 2008.
Analysts polled by Reuters had been forecasting, on average, a break-even quarter on revenue of $5.54 billion.
For the fourth quarter, Motorola is forecasting earnings from continuing operations of between 7 cents and 9 cents per share. Analysts have been expecting, on average, 6 cents per share.
The earnings report found a favorable response on Wall Street. In early trading Thursday, shares were up roughly 9 percent to around $8.68, following Wednesday's closing price of $7.96.
The company, now some years removed from its glory days with the Razr phone, is pinning its hopes on Google's Android software for mobile devices. In September, it unveiled its first Android device, the Cliq. On Tuesday, several weeks into the fourth quarter, Motorola and Verizon Wireless unveiled the Android-based Droid smartphone.
"We delivered on our commitment to improve the financial performance of Mobile Devices and to commercially launch two smartphones in time for the fourth- quarter holiday season," Sanjay Jha, co-CEO of Motorola and CEO of Mobile Devices, said in a statement. "The introductions of our new products powered by Android are important milestones as we begin to address the mobilization of the Internet and the growing demand for modern smartphones. Next year, we will continue to expand our smartphone portfolio and deliver improved financial results."
For the third quarter, sales for Motorola's Mobile Devices segment came in at $1.7 billion, down 46 percent from the year-ago quarter, but the company did compress its operating loss for that segment to $183 million, compared with a year-ago loss of $840 million.
Motorola says it shipped 13.6 million handsets during the third quarter, giving it just under 5 percent of the worldwide market share.
In its Home and Networks Mobility segment, Motorola saw third-quarter sales of $2.0 billion, down 15 percent compared to the year-ago quarter. Operating earnings were $199 million, down from $263 million a year earlier.
The company's Enterprise Mobility Solutions segment logged sales of $1.8 billion, down 13 percent from the year-ago quarter, while its operating earnings were $306 million, compared with $403 million in the year-ago quarter.
Also on Thursday, Motorola said that Edward J. Fitzpatrick, who has been serving as the company's acting chief financial officer since February, is now its permanent CFO.
This story was updated at 5:15 a.m. PDT with additional information from Motorola's Thursday statements, and again at 7:25 a.m. PDT with the stock market response.
Verizon Communications posted on Monday a third-quarter dip in profits, though the company's wireless business showed strong results.
The carrier's overall profits were hurt by the continued decline of its wireline business. But the company is making up for much of the loss with wireless.
That said, Verizon did not add as many customers in the third quarter as AT&T, which had a stellar quarter due to strong sales of the Apple iPhone. Verizon is hoping to pick up ground through its broad partnership with Google announced earlier this month. In addition, Verizon is adding Research In Motion's new Storm 2 to its lineup.
Verizon reported third-quarter net income of $2.88 billion, or 41 cents a share, on revenue of $27.3 billion. Excluding charges, per share earnings fell to 60 cents from 66 cents last year, but the company beat analyst estimates of 59 cents per share.
Verizon's total operating revenue grew 10 percent to $27.3 billion, compared with the third quarter of 2008. This includes revenue from Verizon Wireless and Alltel. If Alltel, the regional wireless operator Verizon acquired in January, had been part of Verizon a year earlier, the revenue increase would have been 0.6 percent.
Verizon Wireless, which is jointly owned by Vodafone Group, continued to show strong growth, despite competition. The company added 1.2 million new customers in the quarter, bringing its total customer base to 89 million. It reported a churn rate for its contract customers of 1.13 percent.
Verizon Wireless also increased its revenue by 24 percent in the third quarter to $15.8 billion. Much of this growth is due to an increase in data services. As the company offers more sophisticated phones, it is requiring more of its customers to sign up for some type of data plan.
Overall wireline revenue fell 4.8 percent to $11.6 billion. Much of the decline comes from customers ditching wireline phone service. That said, Verizon is looking toward its Fios fiber-to-the-home network to provide growth.
The company added 198,000 Fios Internet customers and 191,000 Fios TV customers in the quarter, boasting a 12.6 percent increase in average revenue per user.
AT&T's bet on the iPhone continues to work well. The company reported Thursday a better-than-expected third quarter with 3.2 million iPhone activations--the largest quarterly activation total to date.
The telecom giant had net income of $3.2 billion, or 54 cents a share. Revenue came in at $30.9 billion, down from $31.3 billion a year ago. Wall Street was expecting earnings of 50 cents a share.
If you're an AT&T customer, you may be more interested in the update on its infrastructure improvements. The company said dropped calls in September declined by 12 percent, compared with a year ago.
Total churn for the quarter was 1.43 percent, down from 1.69 percent a year ago.
As usual, AT&T was powered by its wireless unit, which represents 44 percent of total sales. Wireless data revenue was $3.6 billion, up 33.6 percent from a year ago.
Read more of "AT&T cuts churn rate; Activates 3.2 million iPhones; Touts network upgrades" at ZDNet's Between the Lines.
Nokia may still dominate the overall cell phone market, but a steady slide in its smartphone market share could threaten the company's long-term standing.
On Thursday Nokia announced third-quarter earnings that, despite an unexpected loss of $832 million in its telecommunications equipment unit, beat expectations. The company managed to ship about 3 million more handsets than analysts had expected. But it also reported that its share in the growing smartphone market is on the decline, a sign that Nokia is losing ground to competitors, such as Apple and Research In Motion.
Nokia's cell phone shipments and revenue were not as good as they were in 2008. But no one expected them to be. Still, the third quarter of 2009 showed a glimmer of hope that the global recession might be subsiding and people may be returning to normal buying patterns in the mobile market.
Nokia's executives told investors that the company's overall global market share is expected to remain unchanged for the year at about 38 percent, good news considering aggressive attacks from competitors, such as Samsung and LG.
Olli-Pekka Kallasvuo, Nokia's CEO, said in a statement that the company sold more mobile phones in the third quarter than in the second quarter. And the company revised its expectations for the entire mobile phone market. Instead of seeing a total sales decline in 2009 of 10 percent, Nokia now sees a decline of only 7 percent compared to 2008.
Even though, Nokia appears to be holding its own in the overall handset business, it is losing ground in a very important segment of this market, which could hurt the company in the long run.
... Read moreUpdated at 3:30 p.m. PDT with information from the conference call.
BlackBerry maker Research In Motion on Thursday said it sold fewer BlackBerry phones than analysts had expected and that the company's quarterly earnings were hurt by a legal settlement.
Even though RIM still saw strong sales of BlackBerrys, the news sent the company's stock price tumbling in after-market trading. Many are now wondering if RIM's disappointing sales are an indicator of a wider smartphone slowdown or if the news is an indication that the company is losing its edge in an increasingly competitive market.
RIM's co-CEO, Jim Balsillie, said the company is still in very good shape.
"This stuff (smartphones and mobile applications) is going much more mainstream," he said during the conference call. "And we are teed up to go much more mainstream. If this crosses over, as I think we are doing, we are in a good position and a very prosperous position."
He told investors and analysts that they shouldn't look too deeply into the sales numbers for hidden indications of a market slowdown. And despite a lackluster forecast for the next quarter, he said sales are set to explode in the long term.
"I appreciate looking for trends," he said. "But I don't think you should extrapolate too much over a little bump here or there."
Balsillie said earnings fell 4 percent in the second fiscal quarter due in large part to charges associated with a legal settlement.
For the quarter that ended August 29, the company said it earned $475.6 million, or 83 cents a share, compared to profits of $495.5 million, or 86 cents a share, for the same period a year ago.
What really hurt the company's profits was a charge of $112.8 million related to the settlement of a patent dispute with Visto. Excluding this charge, RIM said it would have earned $588.4 million, or $1.03 per share for the quarter.
Revenue rose to $3.53 billion from $2.58 billion a year earlier. Analysts had expected earnings of $1 a share on revenue of $3.62 billion, according to Thomson Reuters.
RIM also reported that it shipped slightly fewer devices than what analysts had expected. The company said it shipped about 8.3 million BlackBerry devices during the quarter, adding about 3.8 million new subscribers. Analysts had expected the company to add about 4 million new subscribers on shipments between 8.5 million and 8.6 million.
RIM said it expects revenue of between $3.6 billion and $3.85 billion for the third fiscal quarter that ends November 28. And it expects earnings per share to be between $1 and $1.08.
These forecasts are slightly lower than analysts' third-quarter revenue of about $3.9 billion. And they wanted to see RIM add 4.3 million new subscribers instead of the 4 million to 4.3 million new subscribers the company predicts.
Although Wall Street was disappointed in RIM's results, the fact remains that the company is still growing handset sales. In fact, sales are up about 40 percent compared to a year ago. But because RIM has been known to have even higher growth rate, some analysts are disappointed with these figures and are punishing the company's stock, which had been up earlier on Thursday in anticipation of the company's earnings news. After the market closed, shares were down 10 percent or more.
So the big question remains: what do RIM's results mean for the rest of the industry?
RIM leads the market in smartphone sales in the United States. But the company has many competitors nipping at its heels. Apple has reported strong growth of the iPhone, especially its new iPhone 3GS, introduced in June. And there are new Google Android phones from HTC and Motorola coming to market soon.
Even the Palm Pre did relatively well during the second quarter, despite the fact that it was being exclusively sold on Sprint Nextel, the third-largest wireless operator in the country, which happens to continue losing subscribers every quarter.
So it's quite likely that sales of smartphones will continue to climb, as Balsillie predicts. But he admitted during the call that the challenge the company faces is in executing its strategy. This means making sure that RIM's latest products get out the door on time.
"I really like our strategy," Balsillie said. "I know we are doing all the right things. But we have a lot of execution risk...And who knows what's going to happen."
For his part, Basillie says the company is well-positioned for the upcoming holiday season with new phones such as the BlackBerry Tour and the latest BlackBerry Curve, which were introduced this summer. Analysts also expect RIM to launch the next version of its touch-screen BlackBerry Storm on Verizon Wireless before the end of the year.
Updated at 2:55 p.m. PDT with information from the conference call.
Sales of the Pre helped boost Palm's smartphone sales in the company's fiscal first quarter of 2010 by about 134 percent compared to the preceding quarter, but Palm still reported its eighth consecutive quarter of loss, and sales dipped over 80 percent.
The Palm Pre.
(Credit: Corinne Schulze/CNET)The Palm Pre, available exclusively through Sprint Nextel, is gaining traction. The company sold 823,000 smartphones in the fiscal first quarter. Many of those smartphones are believed to be the Pre.
But even though sales of the Pre were strong, Palm still ended up losing $164.5 million, or $1.17 per share in its fiscal first quarter. Still, the company's losses beat analyst expectations. Excluding items, the company posted a loss of 10 cents a share. Analysts had predicted a loss of 25 cents a share, according to Reuters.
Palm's sales declined to $68 million. But on a non-GAAP basis, revenue came in at $360.7 million. Wall Street analysts had predicted between $289 million and $297 million.
Palm has struggled to regain footing after losing market share over the last couple of years to companies like Apple with its iPhone and Research In Motion, maker of the BlackBerry devices. The Pre has been seen as the company's last hope at getting back in the game.
CEO Jon Rubinstein said on the company's conference call that Palm plans to focus exclusively on its Web OS software. This new operating system is the foundation of the Pre and Palm's latest device, the Pixi. While the company will continue to sell the current generation of Palm Treo products that use Microsoft Windows, it will focus its research and development on Web OS. And all its future products will be Web OS-based, Rubinstein said.
The move is not surprising given Palm's investment in Web OS, but nonetheless it is a blow to Microsoft, which has been struggling to maintain support for its Windows Mobile operating system. Microsoft made a big deal when it first landed Palm as a licensee back in 2005. Then Palm CEO Ed Colligan took the stage with Microsoft Chairman Bill Gates in San Francisco to tout the new alliance.
Palm executives also said the Pre will soon be available on other carrier networks. In Europe it will soon be available on Telefonica's network. And other carriers will soon follow.
The Pre faces stiff competition in the upcoming holiday season. In addition to the iPhone 3GS, which launched in June, there are several new phones coming to market, including several Android devices. T-Mobile is expected to push its HTC-made MyTouch.
Motorola is also launching new Android devices on T-Mobile's network. Pricing details and a launch date for the new Motorola Cliq haven't been announced. But the device is supposed to be on sale before Christmas. And Motorola is expected to announce another Android phone in the coming weeks.
RIM is also expected to launch a new BlackBerry Storm on Verizon's network in time for the holidays, too.
Still, Palm executives said they believe they have a strong lineup going into the holiday season with the launch of the new Pixi phone, a lower cost device than the Pre, which will also be available on Sprint's network.
Separately, Palm also said that it is planning to sell 16 million shares of common stock. Elevation Partners, which already owns a sizable stake in Palm, expects to buy $35 million worth of stock in the offering, Palm said.
Investors seemed pleased with Palm results, and the company stock, which closed at $14.44 on Thursday, was trading up in the after market.
