Back on 5 November I gave a forecast for HTC’s fourth-quarter (October-December) revenues, based on its October revenues. HTC hadn’t deigned to give on, but using historical figures I had a stab.
My forecast, then: NT$26.64bn, with a 10% error either way, giving a range of NT$23.9bn-29bn.
And how did I do? HTC published its monthly revenue figure for December, which was pretty dramatically down on the previous year, by 57%. In fact the December revenues were its lowest since at least 2005 – my data doesn’t go back further than 2006.
Here’s the graph of my forecast and the reality:
The total revenue for the fourth quarter: NT$25.75bn, which comes in at 3.4% less than my midrange forecast. Thus making the point that if you collect enough data about the past, you might have a chance of getting close to a prediction about the future.
At the end of the third quarter its “cash and equivalents” were US$1.3bn; that’s getting eaten away by its losses. (In aggregate, it hasn’t made a penny in net profit since the third quarter of 2012 – all its profits in nine quarters of that time have been eaten by four quarters in which it made losses.) Its inventories, meanwhile, were 97% of revenue in the third quarter. That’s an excessive amount; you’d normally want those to be as low as possible, since money sunk into inventory is an opportunity cost: you could be spending it on something else, like marketing.
Gross profit at 18% will be NT$4.63bn, so the operating loss will probably be the same as I forecast, at around NT$4bn (US$125m). Full results later this month. Update: HTC announced (PDF) fourth-quarter operating losses of NT$4.1bn; gross margin was 13.9%.
In other words, HTC will never make a profit again in smartphones. Notice too how everyone has forgotten about the HTC Re camera.
Chief executive Cher Wang, interviewed by the Telegraph, doesn’t quite deny that the company might fold the smartphone tent:
“Yes, smartphones are important, but to create a natural extension to other connected devices like wearables and virtual reality is more important… We have a vision of smartphones with different types of form factors, it won’t always look like this,” she says.
So now its attentions turn to virtual reality, with the Vive, which seems likely to be priced around $1,500, with preorders starting on 29 February. (That should give the first-quarter numbers a boost, anyway.)
I’ll go out on a not very long limb here. The Vive’s specifications are high-end: you need to buy not only the headset, but also to have a really high-spec PC to do anything useful, and applications are thin on the ground. It’s going to have a tiny audience at first. Even there it’s competing with bigger and better-funded rivals, including Oculus (owned by Facebook – has a bit of cash) and Samsung (has a bit of cash) and Sony (has cash and installed base of gamers). Ignore specs, because actually buyers mostly will: what’s the reason to buy VR kit? For the experiences. If Valve doesn’t really come through on this, HTC is really going to have a serious problem.
Update 25 January: given the power of this attempt, I’ll have a stab at forecasting HTC’s January 2016 revenues, based on December 2015. The average of the nine years since 2006 suggests that January generates revenues 83.96% as large as December, with a standard deviation of 15.3%.
HTC’s December revenues were NT$6.52bn. Using those, the data suggests HTC’s January 2016 revenues will be NT$5,472m, with a potential range (on one standard deviation) of NT$4.47bn to NT$6.46bn (which is about 18% either way, so quite a large range; the key point is that the forecast suggests January’s revenues will be less than December’s). The first figure is less than US$200m at present exchange rates. We’ll find out the correct number in a week or two.
Post-update: HTC’s January 2016 revenues were NT$6.477bn – just over the top end of my forecast, but still less than December’s (just) and down 47% year-on-year. It’s less than US$200m per month.