August 7, 2012 / 4:20 AM / 8 years ago

Smartphone maker HTC shares hit nearly 4-yr low on grim outlook

TAIPEI, Aug 6 (Reuters) - Shares of HTC (2498.TW) plunged by their daily limit for a second straight session to an almost four-year low on Tuesday, after the Taiwanese smartphone maker’s forecast for a slide in quarterly revenue led to a raft of brokerage downgrades.

The world’s No.5 smartphone maker, once one of the industry’s high flyers but badly hit by competition from Apple Inc (AAPL.O) and Samsung (005930.KS), on Friday forecast as much as a 23 percent fall in third-quarter revenue, much worse than analysts’ forecasts. [ID:nL4E8IU0ZL]

“There are some views that HTC may post a loss in as early as the fourth quarter this year,” said Michael On, managing director of Beyond Asset Management.

“Its future is not looking good. It can’t compete with Samsung. Even when its share price was at its last lows the company was at least still making a profit.”

Shares of HTC had shed 7 percent to T$240.50, their lowest since November 2008, as of 0120 GMT. The broader market .TWII was up about 0.2 percent.

HTC, formerly a contract maker, had a fairytale ride in 2010 and early 2011, when its shares more than tripled in the 14 months to April 2011, reaching T$1,238.10. The company’s sales grew four-fold in 1-1/2 years as consumers snapped up its innovative phones with their distinctive large clock numerals.

But it suffered an equally rapid fall from grace as its phones failed to keep up with Apple’s iPhones and Samsung’s Galaxy range.

HTC sees third-quarter revenue at between T$70 billion and T$80 billion ($2.3 billion and $2.7 billion). That compares with T$91 billion in the second quarter, and analysts’ average estimate of T$92.51 billion in a Thomson Reuters poll.

HTC’s grim outlook further disappointed analysts after the company posted another forecast-lagging second-quarter result last month, and many downgraded the company to “sell”.

Sanford Bernstein analyst Pierre Ferragu, who has been a believer in the Taiwanese company but joined the latest wave of downgrades, and cut it to ‘market perform’. Ferragu noted the increasing challenges the company will face from Apple and Samsung, and said its lack of brand visibility will further drive down its share price and gross margin.

Further enhancing its brand to compete with Apple and Samsung is vital for HTC, many analysts say.

“The HTC x one is a very good product, but consumers are ignoring it over Samsung’s Galaxy S3 because of the brand,” said Gartner analyst Carolina Milanesi, who based in California.

“I feel like they have to step up their game, they cannot afford to operate the way they did four years ago when they were the new kid on the block. It is almost like a kid going to junior high to college and still playing around as it was a kid.”

($1 = 6.3794 Chinese yuan)

(Reporting by Clare Jim; Additional reporting by Tarmo Virki in Helsinki; Editing by Chris Gallagher)

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