22 July 2019
A file picture of Cher Wang, co-founder and chairperson of Taiwanese smartphone maker HTC. Wang said on Tuesday that she is hopeful her firm will record a profit this year. Photo: Bloomberg
A file picture of Cher Wang, co-founder and chairperson of Taiwanese smartphone maker HTC. Wang said on Tuesday that she is hopeful her firm will record a profit this year. Photo: Bloomberg

Can HTC turn things around quickly?

Taiwan’s HTC Corp, which once figured among the largest smartphone makers in the world, has been losing money in the past few years, causing anxiety among its shareholders.

With the troubles seeming to persist, stockholders have begun to lose their patience with the tech giant’s management, which is led by co-founder and chairperson Cher Wang.

On Tuesday HTC held its annual shareholders meeting. At the event in Taiwan, some shareholders vented their anger and called for ouster of the senior management, saying the executives need to shoulder responsibility for the firm’s poor operating results.

The anger is understandable as shareholders have not been getting returns on their investment in HTC for many years, with the stock price falling almost continuously since it hit a record high of more than NT$1,000 in April 2011.

The slide came as HTC, in recent years, failed to launch outstanding products to compete with market leaders like Apple and Samsung, as well as Chinese players such as Xiaomi and Huawei.

HTC has slipped out of the Top Ten league in global smartphone shipments. Its products, however, still find support from some die-hard fans. An example is the latest smartphone U12+, which has won professional recognition in terms of quality and photography.

The U12+ model, among other accolades, received high marks from DxOMark, a tech website that provides image quality ratings for standalone cameras, lenses, and mobile devices equipped with cameras, as chairperson Wang noted at the annual meeting Tuesday.

For the first quarter of this year, HTC recorded a net profit of NT$21.1 billion (US$694 million), compared with a loss of NT$9.8 billion in the previous quarter. The headline profit came after eleven straight quarters of losses.

However, the profit came only due to one-off gains, and the company was still under loss at the operating level.

The first-quarter result was boosted by a deal in which the firm sold its smartphone ODM assets to Google last year. Excluding one-time non-core business gains, the main business of HTC posted operating loss of NT$5.2 billion in the three months to March.

It appears the company may not be able to turn its business around quickly based on its existing virtual reality and smartphone products. HTC needs a much higher revenue base to cover its operating cost related to the production capacity in Taiwan, as well as the investment in R&D for new technology.

HTC is yet to find a new way to build up a turnaround momentum, though Wang has told investors that virtual reality is the future of HTC, a new business the company stepped into since 2015 but is  yet to generate significant sales and revenue for the group.

As of early 2018, HTC owned more than 3,000 VR-use content items developed by Viveport and Steam, helping it take the lead over its peers in the global VR market, Focus Taiwan news website quoted Wang as saying.

Viveport is a Vive app store that provides users with content for VR headsets, while Steam is a content platform under US video game supplier Valve, which jointly developed the Vive with HTC, Focus Taiwan noted.

Wang said the VR development efforts has laid a solid foundation for HTC to expand its reach into augmented reality, artificial intelligence, 5G, Internet of Things and blockchain technology.

By developing the emerging technologies, HTC aims to realize its vision of “Vive Reality,” which will allow users to interact with one another in VR and AR environments in a natural manner, the HTC boss said.

While HTC is focusing on new-technology development, the firm will at the same time continue to introduce new smartphone models to the market, Wang said, stressing that smartphone operations remain a strategic business for the Taiwan tech firm.

The company has reworked the strategy, trimming the number of smartphone models and focusing on specific products like the newly-launched U12+ which features some advanced technologies.

The critical feedback has been good but sales have remained weak so far.

Still, Wang said she is confident that HTC will turn a profit in 2018, setting the stage for potential cash dividends to shareholders.

The management will continue to work hard, the chairperson told shareholders, adding that she believes HTC will win their praise at the next annual meeting.

The words were clearly aimed at soothing the shareholders, asking them to be more patient and not lose faith in the company.

Now the question is: how long would the stockholders be willing to wait before they decide to give up on the once shining star?

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EJ Insight writer

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