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Downward trajectory: HTC reports fourth consecutive quarter of revenue decline

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HTC, the beleaguered Taiwanese smartphone maker that seemed poised to regain its financial footing with well-reviewed new flagship products, may have a bumpier road to recovery than previously predicted. In an earnings report on Monday morning for the first calendar quarter of 2016, the company reported a dip in revenue of 64 percent, and a 78-percent dive in profits year on year — the fourth consecutive quarter of major declines.

HTC’s losses amounted to about $148 million in the first quarter of 2016, a far cry from 2015’s comparatively rosy first quarter. Back then, it raked in 41.5 billion Taiwanese dollars (about $1.29 billion) in revenue and 8.2 billion Taiwanese dollars ($250 million) in profits. By contrast, so far this year, HTC has only managed a paltry 14.8 billion in Taiwanese currency ($460 million) and 1.8 billion ($60 million) in profits.

The company’s solution is cost cutting, predictably. Some of this is tangible — HTC recently sold real estate — while other measures involve the continued trimming of fat from the company’s product development and manufacturing lines. (In August of 2015, the company eliminated 2,250 “redundant” jobs — about 15 percent of its staff.) “HTC will continue to streamline processes and optimize resources to develop products in the most effective way,” the firm said in a related statement.

Despite the first quarter’s dire implications, HTC asserts publicly that it remains confident that things are looking up. It projects growth in the second quarter of this year thanks to “strong launches” both for its new flagship smartphone, the HTC 10, and its HTC Vive virtual reality headset. (In March, the company reportedly sold 15,000 Vive units within the first 10 minutes of their availability — a development which saw the company’s stock jump 19.75 percent.) And with supply chain improvements in place, the firm’s CEO, Chialing Chang, predicts the company’s smartphone division will break even as early as the third quarter of this year.

“The media and consumer buzz around HTC, including for the keenly awaited launches of the flagship smartphone and Vive virtual reality system, clearly demonstrate our leadership in innovation, and have provided a great boost to the HTC brand,” Chang said in a press release. “We have been working hard to lay the groundwork over the past year.”

A substantial bit of that groundwork will involve tapping the Vive’s burgeoning ecosystem. Earlier in May, the company debuted a VR accelerator program, Vive X, that’ll see $100 million of its own capital invested in startups based in Beijing, Taipei, and San Francisco. In return for funding, office space, and the mentorship of HTC’s VR development team, companies which are selected for the program have agreed to pay HTC a “small amount” of their profits — a revenue arrangement which could become quite lucrative as VR continues to make consumer inroads.

The smartphone markets presents a tougher challenge. HTC’s total global share of cellular subscribers stood at 3.2 percent as of January, market analytics company comScore reports —  a sharp 0.6-percent drop from March 2015’s 3.8 percent. Clawing out from that position won’t be easy, but HTC may have a helping hand — rumor has it that the company is set to produce the next phones in Google’s premium Nexus line.

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