The smartphone market might not be as “recession proof” as observers had been expecting. HTC did an about-face today on its financial predictions for 2009, saying that its revenue will fall, according to reports by the Dow Jones, Reuters, and IDG news services.

Analysts have consistently claimed that sales of smartphones will continue to grow this year, defying an overall drop in handset sales. In March, for example, Infonetics Research predicted modest growth for the segment this year. In February, Forward Concepts predicted the smartphone market would grow 13 percent during 2009. Other firms, such as ABI Research and IDG, have also echoed these bullish predictions.

HTC is the world's leading manufacturer of Windows smartphones, the leading vendor of Android phones, and, according to Reuters, the number four manufacturer of smartphones overall. When it reported first-quarter financial results at the end of April, HTC said it would launch fifteen new phones this year. The company also predicted second-quarter sales would be up about eight percent year-on-year, or 22 percent quarter-on-quarter.

In June, HTC continued this optimism, stating that it expected overall growth during 2009 to approach 20 percent. Jason Mackenzie, VP for HTC America, was said to have told Reuters in an interview, "I expect to grow U.S. volume by at least 50 percent from 2008 to 2009."

But in a call with analysts this morning, HTC chief executive Peter Chou reportedly said that 2009 revenue is now expected to decline slightly, by an amount described as being in the low single digits. "Our momentum in the second half of this year may not be as strong as we initially thought it would be," Reuters quotes Chou as saying.

HTC is said to have blamed the revenue shortfall both on a delay in the launch of new products, and on a faster-than-expected fall in unit shipments. "Momentum on both the Windows Mobile and Android platforms is also turning out to be weaker than expected," Chou is said to have added.

Another factor pushing HTC revenues down appears to be the increasing number of affordable, mid-tier smartphones offered by the company. HTC's average selling price for handsets declined during the second quarter to $358 per unit, from $364 per unit in the first quarter and $381 per handset in the second quarter of last year, IDG reports.

None of the reports mentioned whether HTC expected the shortfall in smartphone sales to be felt more sharply with Android or Windows Mobile phones. However, according to an industry report earlier this month, HTC executives stated that Android now represents 30 percent of HTC's smartphone sales, and that the company projected the figure would surpass 50 percent sometime next year, eclipsing Windows Mobile sales.

Hanging on at the high end …

Despite the bearish comments attributed to its chief executive, HTC is by no means giving up on higher-end smartphones. In June, for example, it announced the Hero, its fourth phone employing Google's Linux- and Java-based Android operating system. Like the company's first three Android devices — the HTC G1, the HTC Magic, and the Magic spin-off, the MyTouch 3G (pictured above, left) — the Hero uses an ARM-based Qualcomm MSM7200a system-on-chip (SoC).

The touchscreen device also offers the same 3.2-inch, QVGA (480 x 320) display as the earlier models, plus other features such as quad-band GSM/GPRS/EDGE network support, 802.11/b/g WiFi, Bluetooth 2.0, GPS, accelerometer, and a digital compass.

HTC's Hero
(Click to enlarge)

The Hero's most distinctive feature is its user interface, HTC Sense, which the manufacturer says will be "introduced across a portfolio of phones," reportedly including Windows Mobile devices.

According to Reuters, HTC will raise its operating budget this year to above 15 percent, from its previous 13.5 percent, allowing it to expand its marketing campaigns. The company also reportedly said its gross profit margin for both the third quarter and the full year will be about 32 percent, in line with previous guidance.

Further information

To see Reuters, IDG, and Dow Jones news service reports on HTC's latest 2009 revenue forecasts, go here, here, and here, respectively.

 
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