Tai­wan’s HTC cuts 2,000 jobs af­ter big­gest quar­terly loss

The China Post - - FRONT PAGE -

Tai­wanese smart­phone maker HTC said Thurs­day it would cut more than 2,000 jobs, slash­ing its work­force by 15 per­cent, af­ter post­ing its big­gest ever quar­terly loss.

The an­nounce­ment came less than a week af­ter the firm said it had swung to a deep loss of NT$8.0 bil­lion (US$252.7 mil­lion) in the sec­ond quar­ter, from a net profit of NT US$2.26 bil­lion in the same pe­riod last year.

That saw HTC’s clos­ing share price sink to its low­est in more than a decade.

Once the star of the in­tensely com­pet­i­tive smart­phone sec­tor, HTC has seen its for­tunes col­lapse as Sam­sung, Ap­ple and strong Chi­nese brands like Len­ovo and Huawei have surged head.

The jobs cuts are part of a “busi­ness re­align­ment” to spur growth, the firm said in a state­ment.

It was aim­ing for “sig­nif­i­cant prof­itable growth with a leaner and more ag­ile op­er­at­ing model,” the com­pany said.

“This re­align­ment will also in­volve a stream­lin­ing of oper­a­tions to re­sult in an ex­pected re­duc­tion in op­er­at­ing ex­pen­di­ture of 35 per­cent; this in­cludes an ex­pected 15 per­cent in head­count,” it added.

An HTC spokes­woman would not spec­ify how many peo­ple would be laid off, but said the global head­count was 15,000, which would put the job losses at around 2,250.

Lo­cal media es­ti­mated at least 2,300 em­ploy­ees would be hit.

HTC cited weaker- t han­ex­pected de­mand for its high-end prod­ucts and poor sales in China for last week’s re­sults.

The com­pany has pinned its hopes on new prod­uct ar­eas like cre­at­ing vir­tual re­al­ity ex­pe­ri­ences, in­clud­ing the head­set HTC Vive that is cur­rently on a dis­play tour in the United States and Europe.

Chair­man and CEO Cher Wang said the re­align­ment would see the es­tab­lish­ment of new busi- ness units fo­cus­ing on ar­eas in­clud­ing pre­mium smart­phones and vir­tual re­al­ity.

“As we di­ver­sify be­yond smart­phones, we need a flex­i­ble and dy­namic or­ga­ni­za­tion to en­sure we can take ad­van­tage of all of the ex­cit­ing op­por­tu­ni­ties in the con­nected lifestyle space,” Wang said Thurs­day.

HTC Stock Plunges

Shares of HTC took a beat­ing af­ter the com­pany an­nounced a day ear­lier a tem­po­rary halt of sales of the big­ger ver­sion of its flag­ship HTC One M9 model in the Nether­lands due to re­ported prob­lems about 4G LTE con­nec­tiv­ity, deal­ers said.

The cur­rent selling also showed lin­ger­ing con­cerns over the com­pany’s out­look af­ter the smart­phone ven­dor gave gloomy guid­ance last month for the third quar­ter that pointed to a net loss of more than NT$5 per share, the deal­ers said.

The com­pany shed 7.82 per­cent to close at NT$50.70 on the news of the tem­po­rary sales sus- pen­sion in Hol­land. The com­pany said it has launched an in­ves­ti­ga­tion into the re­ported con­nec­tiv­ity prob­lems.

“In­vestor con­fi­dence in HTC has be­come very frag­ile, so any neg­a­tive leads could send the stock into a tail­spin,” MasterLink Se­cu­ri­ties an­a­lyst Tom Tang said. “That’s why the tem­po­rary sus­pen­sion of sales of one of its flag­ship mod­els in Hol­land sparked sell-off soon af­ter the lo­cal main board opened.”

In a state­ment is­sued the pre­vi­ous day, HTC said that the com­pany has launched an in­ves­ti­ga­tion into the re­ported con­nec­tiv­ity prob­lems re­lated to the HTC One M9+, which is equipped with a 5.2-inch 2K dis­play.

The probe fol­lowed a re­port on tech­nol­ogy web­site Phone Arena that said HTC re­quested the Phone House chain in the Nether­lands to sus­pend sales of the One M9+ and promised to re­lease a soft­ware up­date to fix the prob­lem be­fore it goes back on sale. The sales halt di­rec­tive also ap­plied to other dis­tri­bu­tion chan­nels in the Nether­lands.

The HTC One M9+ hit re­tail stores there in mid-July at around US$850.

“The sales sus­pen­sion in the Nether­lands dealt another blow to mar­ket sen­ti­ment to­ward HTC at a time when in­vestors have been wary of the smart­phone sup­plier’s prof­itabil­ity in the wake of its sur­prise forecast for the third quar­ter,” Tang said.

In an in­vestor con­fer­ence held last week, HTC said it could post a loss per share in the July-Septem­ber pe­riod rang­ing be­tween NT$5.51-NT$5.85, af­ter post­ing a loss per share of NT$9.7 the pre­vi­ous quar­ter.

Based on the third- quar­ter forecast, HTC could in­cur about NT$15 in net loss per share dur­ing the first nine months of this year.

“So it is im­pos­si­ble for HTC to re­port a profit for 2015, even if the com­pany launches any killer mod­els to tap a buy­ing spree in the fourth quar­ter. Such cau­tious sen­ti­ment to­ward its bot­tom line has been weigh­ing on the stock per­for­mance,” Tang said.

Sev­eral for­eign bro­ker­ages have low­ered their tar­get prices on HTC shares. A U.S.-based bro­ker­age has even cut its tar­get price on HTC shares from NT$100 to NT$45, the low­est level among the for­eign in­sti­tu­tional in­vestors track­ing the stock.

“I am also wor­ried about HTC’s oper­a­tions in China. Af­ter the Chi­nese yuan fell sharply in re­cent ses­sions, it is pos­si­ble for HTC to re­port for­eign ex­change losses from its sales in China,” Tang said.

Tang said that wise in­vestors should keep their hands off the stock un­til the smart­phone ven­dor shows signs of a turn­around.

AFP

A staff mem­ber stands be­hind an HTC logo on a door in New Taipei City on Dec. 31, 2012. The Tai­wanese smart­phone maker said Thurs­day it would cut more than 2,000 jobs.

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