HTC's net profit up 3.1%
Sales of smart phones are better than expected for the latest quarter
TAIPEI—HTC Corp. said its first-quarter net profit rose 3.1% amid better-than-expected sales of smart phones, as consumer demand began to improve last year with the global economic recovery.
Analysts said the phone maker's marketing expense to improve brand recognition appears to have started paying off. HTC, originally a contract maker of phones, began making its own-brand handsets a few years ago and has been pumping resources into raising its brand awareness to better compete with established smart-phone makers like Nokia Corp.
The company, based in Taoyuan, Taiwan, said in a prepared statement Tuesday that net profit for the three months ended March 31 rose to 5.03 billion New Taiwan dollars (US$158.7 million) from NT$4.88 billion a year earlier.
Revenue rose 19% to NT$37.7 billion from NT$31.59 billion, higher than the forecast that HTC gave in January of between NT$32 billion and NT$34 billion.
HTC declined to comment on the results. The company is the world's largest maker of smart phones using Microsoft Corp.'s operating system, by shipments, and also makes smart phones using Google Inc.'s Android operating system.
Chialin Lu, an analyst at Macquarie Capital Securities, said the higher-than-expected revenue was helped by strong sales growth, especially from North America. "I think previous market concerns over the firm's large marketing expenses and lower-priced smart phones were overdone," he said.
Analysts had been concerned that HTC's strategy of selling lower-priced smart phones would narrow the company's margins, while high marketing expenses to increase brand recognition would pay off only in the long run and weigh on profit in the interim.
HTC's operating expenses in the fourth quarter, for example, rose 33% from a year earlier to NT$7.05 billion, mainly because of a marketing campaign in North America and Europe.
But Mr. Lu said HTC is already starting to reap the rewards of advertising and marketing campaigns, as more telecommunications operators in the U.S. are willing to support the company with larger subsidies for its smart phones.
Sprint Nextel Corp. launched its first fourth-generation smart phone with HTC, the Evo, in March. Fourth-generation mobile technology, the next step in wireless telecommunications, allows faster downloads using greater bandwidth compared with the current third-generation standard.
HTC Chief Executive Peter Chou said in an interview last week that the company's growth in the U.S. market is outpacing other smart-phone makers this year.
HTC shipped 5.5 million to six million smart phones to the U.S. market last year, according to the company's annual report. Mr. Chou said that number is expected to rise this year. He also said the company plans to introduce six models with its Chinese partner, China Mobile Ltd., for the China market this year.
