HTC posts first profit in a year, despite decreased revenue

HTC is making money again. On Thursday, the Taiwanese smartphone maker reported an unaudited NT$2.26 billion ($75.6 million) profit in the second quarter of 2014, its first since the same quarter last year. However, its NT$65 billion ($2.17 billion) revenue was not only on the low end of company guidance, but was down from the same time last year.
In the past quarter, HTC has released a few phones of note: the flagship HTC One M8, and a lower cost version with a plastic shell aimed at emerging markets, specifically China. It also launched a mini version of its flagship in Europe and Asia. However, according to the Wall Street Journal, HTC’s profit this quarter is due to cost-cutting measures, not increased handset sales. HTC has addressed supply chain issues, and, unusually for the one-time OEM, has started outsourcing some production to reduce costs.
While the HTC One M8 earned rave reviews, it’s still unclear how much people value premium-feeling phones and how the device’s perceived quality boosted sales. HTC’s solid-feeling industrial design is widely considered to be superior to Samsung’s build quality, but the Galaxy S5 still easily outsells HTC’s aluminum phone. In April, HTC’s highest ranking design employee in its San Francisco office, Scott Croyle, left the company. In my opinion, HTC’s best bet for a needle-moving sales hit in the remainder of 2014 and going forward is low-cost devices for emerging markets, not the high-end Android(s goog) phones the company is best known for in the United States.
In the past two years Q2 has been HTC’s best quarter, likely because the company announces new flagship products in the early part of the time period.