Mobile

HTC hits rock bottom: First-ever operating loss could come next quarter

A single great smartphone is only getting HTC so far.

The company has issued its earnings guidance for the third quarter and the situation is either bad or terrible depending on how you look at it: While HTC predicts revenue as high as $2 billion, its operating margin could dip as low as negative eight percent.

If that ends up being the case, it would be the first time in HTC’s history as a public company that it will report a quarterly operating loss. HTC may be struggling right now, but surprisingly, it’s still been turning a profit.

HTC says there are a few causes for its expected decline. “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,” the company said in a release.

While that “higher cost structure” points to a number of factors, a big part of it comes from Iron Man. As a part of the marketing blitz for its upcoming phones, HTC plans to draw on the talents of Robert Downey Jr., which could cost it as much as $12 million. Good marketing doesn’t come cheap, after all.

HTC, however, says that the third quarter will mark the bottom of its decline. The company says it plans to introduce “a range of innovative and competitive mid-tier products” — one of which is the HTC One mini, which the company officially announced earlier this month.


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