Android smartphone pioneer hits turbulence in Q3

HTC saw revenue drop in the third quarter as competition from rivals such as the iPhone 3GS hurt

High Tech Computer (HTC), which developed the first smartphone based on Google's Android mobile operating system, saw revenue decline in the third quarter due to increased competition and weak sales in Europe.

The company's revenue fell 10 percent year on year to NT$34.01 billion (US$1.05 billion) and its net profit dropped to NT$5.70 billion from NT$6.99 billion, the company said Monday.

Increased competition in the smartphone market and the launch of the iPhone 3GS in particular have hurt many smartphone makers, analysts say. Apple slashed the price of the iPhone 3G to US$99 when it launched the iPhone 3GS in June, and put a low, US$199 price tag on the new handset. The move helped Apple report record high quarterly revenue of US$9.87 billion in its most recent quarter, which ended Sep. 26, as iPhone and Mac computer shipments hit all-time highs.

HTC's revenue has fallen in the months since the iPhone 3GS launched. The company's revenue in the second quarter, which ended June 30, was NT$38.20 billion.

The Taiwanese smartphone maker said its revenue in the fourth quarter will likely reach NT$40 billion to NT$42 billion, a drop compared to last year's NT$47.38 billion.

The U.S. market showed strong growth momentum in the third quarter, HTC said in a statement, and the company expects it to continue to do so in the fourth quarter. Sales of Android devices should increase in the fourth quarter since U.S. mobile network operators have increased shelf space for the handsets, HTC said.

The European market was weaker during the third quarter and that trend could continue, HTC said. Sales of Android smartphones have also been weaker in Europe than the U.S., HTC said, and the company plans redouble its marketing efforts to increase awareness of Android.

A number of rival Android smartphones also entered the market in the third quarter and the trend has continued into the fourth quarter, with new smartphones from Acer, LG Electronics and Motorola.

HTC said the new competition "proves our vision" and will likely reshape the mobile phone OS landscape by marginalizing niche OSs. The company has launched more Android-based smartphones than any other manufacturer, from the T-Mobile G1 (also called the HTC Dream), to the Magic, Tattoo, Hero and Droid Eris.

The company plans to maintain its leadership in Android smartphones by continuing to ship more handsets than its rivals and developing a broad range of devices, as well as offering value added technology and software on board.

The smartphone price war appears to be benefitting users at the checkout line. HTC said the average selling price of its handsets fell to US$348 in the third quarter, compared to US$364 in the first quarter of this year and US$358 in the second quarter. HTC shipped 2.8 million smartphones in the third quarter, compared to 2.9 million the same time last year.

Google developed Android to make Internet services such as social networking sites, e-mail, online maps and particularly Google services more easily accessible on smartphones.

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Dan Nystedt

IDG News Service
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