HTC 10 fails to connect as Q2 revenue falls

The second quarter of 2016 was an important one for HTC, as the company looked to buck a trend of consecutive quarterly losses following the release of two new high-end products – the HTC 10 and the Vive virtual reality headset. The company has just posted its Q2 2016 financial results, and unfortunately it paints further bad news for the already struggling Taiwanese manufacturer.

Quarter-on-quarter, the pictures shows some very faint signs of recovery. Revenue increased from NT$14.8 to NT$18.9 billion and the company’s operating margin increased from -32.4 to -22.5 percent. This led to a slight decrease in the company’s losses, moving from NT$4.8 billion in Q1 2016 to NT$4.2 billion in Q2. Even year-on-year the company has improved on its Q2 2015 NT$5.1 billion loss, suggesting that the company’s cost cutting measures are paying off. However, this is still the fifth consecutive quarterly loss for the company.

Looking at year-on-year revenue paints an even more painful picture. Income has fallen from NT$33 billion to just NT$18.9 billion since 2015. This is a notable 42 percent fall that has eaten into the company’s gross profit margin. Such a poor result for this quarter is particularly significant. This is usually the strongest quarter for the company in terms of revenue, as it is the first quarter of the year that contains sales for HTC’s latest flagship smartphone – this year it was the HTC10.

Although HTChas other phones on the market too, the data strongly suggests that the HTC10 has failed to live up to the sales performance of last year’s One M9 in its opening months, despite the company making a number of design changes. Even HTCis reluctant to talk figures or comparisons in the report, instead choosing to focus on the phone’s awards and continued “sales momentum”. It is tough to pin-down exactly what has led to such poor results, although an overly high price tag, small advertising budget, and a lack of exciting new features could all be partially responsible.

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HTC seems far more bullish about its Vive virtual reality headset. Although the hardware is only selling in very small numbers right now, the company remains focused on building a strong ecosystem that will hopefully pay off in the future. Last week, the business added new members to its $12 billion VR Venture Capital Alliance and is keen to talk about expansion across the globe. We shall just have to see how well this pays off.