With all the excitement of the HTC One Mini, we’d almost forgotten about the Taiwanese smartphone maker’s financial woes and the sense of impending doom that surrounded the company after it posted its Q2 predictions earlier this month. These issues are front and center again today, after the company announced the official results of its second fiscal quarter, offering a dire prediction for the next three months.
HTC’s operating margin for Q2 was just 1.5 percent, but for the next quarter the company could be back in the red. It expects operating margins to fall flat or down 8 percent and gross profit margins between 18 percent and 21 percent. While a company’s net profit is the most common indicator of its financial viability, operating margins are also an important factor, representing remaining revenue after production costs have been payed. “Our overall gross margin has been impacted by the relatively higher cost structure, lack of economy of scale and certain provisions needed to facilitate the clearance of aging products in the channel,” HTC explained. “Actions have been taken and we expect to see improvement in Q4.”
In response to its gloomy Q2 report, HTC has announced plans to push into the mid-tier smartphone market with a new series of devices in the second half of 2013. While it isn’t spelled out explicitly, the implication seems to be that the HTC One has served its purpose in improving the company’s visibility; now the OEM can focus on mid-range devices, breaking with its recent focus on premium design. With the One Mini already announced, we expected HTC to follow it up with a phablet-sized One Max, though these plans may now be shelved so it can focus on pushing out cheaper devices.