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