HTC back to profit, future hinges on wearables

Taiwanese smartphone maker HTC has bounced back into the black in Q2, boosted by sales of its flagship smartphone One M8 and cost-cutting efforts.

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For the three months ended in June, the phone-maker booked an 80% year-on-year rise in net profit at NT$2.26 billion ($75 million), beating market expectations of NT$2.06 billion. This is in contrast to the loss of T$1.88 billion in the previous quarter.

HTC saw a revenue boost from the launch of its main product this year, the One M8. However, there looks to be some signs of sales tapering off from the monthly figures in May and June. Sales could come under more pressure in the following months, with competitors launching new handsets, such as the widely anticipated iPhone 6 by Apple this quarter. It also looks set to be squeezed on the lower end of the market by other Chinese phone-makers.

Amid the intensifying competition, the sustainability of HTC’s revival is likely to hinge on the wearables front, where it has yet to make much inroad. It will need to catch up quickly with the competition, which have been pushing out smartwatches and fitness related devices and apps – all helping to tighten their hold on consumers within their hardware and software ecosystems.

HTC has yet to give any clear details on what and when we can expect something in the wearables space, but it is reportedly working with Google for a launch before Christmas. Investors will hope it has learnt its lesson when it took too much time and money to produce last year’s HTC One, which arrived too late to market to maximize sales and dragged down profit margins from the high cost of production.

Ahead of the Singapore Open

Some optimism in the markets is likely today after last night’s better-than-expected US non-farm payrolls. A stronger USD/JPY could see investors giving a lift to Japanese stocks. Investor sentiment will also build on the encouraging manufacturing data and services PMI from China this week.

We are calling for the Singapore market to open up 0.75 points at 373.45.

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