HTC expects rough fourth quarter

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.

[Chao_Sama]

Looking forward to the HD2 but they dropped the ball when they did not offer the european model euro

[ivorycruncher]

Its biggest enemy is itself. HTC produces fantastic software enhancements for mobile phone operating systems, but insists on running said software on outdated hardware. The 528MHz processor and 3.2" screens just aren't cutting it, but they don't seem to be in any big hurry to upgrade. At least they put larger screens on the WinMo phones, but except for the HD2, they're all still resistive, not capacitive. And only the HD2 has a CPU faster than the old 528MHz ARM11 chip. I love my Droid Eris, but it really could use a speed boost. The HTC Passion has been greatly rumored to be released on Verizon yet this year, with a large high-res capacitive screen, Snapdragon processor (same as the HD2), and Android 2.0. If such a device exists and gets released this holiday season, I think they'll be doing much better. Until then, Motorola has stolen all the thunder in the Android/Verizon arena.

[iBuzz]

If Windows Mobile was such a vital product for them, there would be no need to spend very expensive development resources to come out with Android-based products. The fact they HTC has come out with Android phones is very telling. I suspect that they've seen a significant drop in demand for their WinMo phones and are trying to make it up with Android (which is the right strategy). But of course HTC cannot abandon WinMo just yet because they are still selling some phones (probably to IT managers still stuck in 2003 and still think Palm Pilots are cool - after all, if your computing experience still revolves around WinXP, you probably think WinMo is pretty nifty) and HTC can't just jettison that business yet. But they see the writing on the wall for WinMo.

[Random_Walk]

I suspect that the reason they still do Windows Mobile development is because their licensing agreement w/ Microsoft hasn't died off just yet. They may be contractually obligated to pump out x number of models per year with Windows Mobile on it, or face a penalty fee.

That said, I suspect that unless Windows Mobile 7 pulls off some sort of miracle, HTC may well decide to ditch the WinMo line altogether.

[jlopezcnet]

And so it begins... I see that android sales have been good for them BUT one of the things I keep pointing out is the branding issue when you release a phone and OS as separate brands.

There is a reason the iPhone is going so well. There is one unified experience in the phone and the OS. There is no branding mismatch. You have the moto, samsung, htc arena trying to brand individual androids and windows mobile devices with a one size fits all mentality. If it didn't work for Windows Mobile how can anyone assume it will work for them?

Nokia may be taking a hit but they have been smart to unify the brand. RIM has unified the brand. Apple has a unified brand. Palm has one but chose a bad carrier (sprint)

Android will fail because it's too fragmented and separated and has a handful of apps - most of which are garbage. The phones are clumsy and made out of plastic that will break in a year. Plastic touch screens will also scratch very easily.

People will buy the phone and not go back. People upgrade to get better features, not to replace a phone that didn't live up to its promise and falls apart after a year.

[billd888]

Is battery life for all their phones a problem? A friend has one of the T-Mobile Google phones and it is constantly needing charging. I recently got a Touch Pro and cannot get the battery to last through either. Is this common with their other phones?

[ctrue]

For whatever reason the battery life does not do well out of the box for some. There is a registry file to load that makes a huge difference as well as some other tweak to improve it further. These types of fixes should be integrated into the phones so people have better out of the box experiences. After making these changes I am extremely happy with my Touch Pro.

[ballmerisanape]

These companies are going to nickle and dime themselves out of business if they don't change gears. People don't want cheap... the standard has been changed.. and you can get it for as low as $100.

[cow8moo]

The HTC Hero still has not been updated to the new Android. Avoid until they update.