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HTC’s March production problems may carry a dreadful cost

Published Mar 13th, 2013 7:45AM EDT
HTC Production Problems

The latest setback for the new HTC (2498) flagship model is the announcement by UK retailer Clove about the device’s British launch getting delayed from March 15th to March 29th. This come after a long series of brokerage research notes discussing the component sourcing problems HTC is having. It has seemed clear for months that early volumes of the HTC One are going to be thin through April; but it now looks as though March shipments could be minuscule.

What makes the situation dire is the combination of HTC’s disastrous February revenue dive and the onslaught of hot rival models in the March-April timeframe. HTC’s February sales plunged by more than 40% compared to February 2012. This was a clear sign that the new Windows models 8X and 8S are not capable of offsetting the sales erosion of older Android devices. Carriers have effectively stopped stocking HTC’s 2012 Android models due to weak demand and anticipation for the HTC One, which features a new design approach.

If HTC is now unable to ship substantial volumes of the HTC One in March and April, the company faces the prospect of 50% revenue declines from the already weak numbers that HTC posted during March and April of 2012. Sony (SNE) has a surprise hit in its hands in Asia and Europe with the Xperia Z. The global search volume for Xperia Z now nearly matches the search volume for HTC One, which was supposed to be a far bigger phone in March 2013. Samsung is about to announce the Galaxy S IV, which is expected to boast some very impressive new features. The Galaxy sales blitz will likely kick off already in April in select markets.

The Blackberry (BBRY) Z10 will also roll out soon in the United States. The buzz about the new iPhones will likely kick into overdrive during April and May. HTC is running out of time. The production stumbles of March and April are effectively robbing it of the only decent window of opportunity it had to stage a comeback. The surprise Sony resurgence could not have happened at a worse time for Taiwan’s smartphone champion. If the 8X orders are drying up, the March revenue numbers could be a red rout for HTC.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.