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6/6/2012
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Eric Zeman
Eric Zeman
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HTC Warns Of Lower Smartphone Sales

HTC cut its sales targets for the second quarter, as the U.S. import ban on its products, slow European sales, and a new Apple lawsuit hurt its recovery efforts.

HTC on Wednesday cut its revenue forecasts for the second quarter of the year by 13.3%, warning that sales of its newest smartphones aren't what it expected. Though the company is performing well in China, sales are soft across Europe. Toss in the two-week delay it faced gaining U.S. entry with the One X and EVO 4G LTE and fresh patent lawsuits, and the company's outlook isn't so hot.

HTC is the world's fifth largest producer of smarthones, but saw its fortunes erode during the second half of 2011 as Samsung's smartphones eclipsed those made by HTC. HTC has had a number of bad quarters in a row, and decided to reduce the number of smartphones it releases in a given year.

The HTC One series, which debuted earlier this year, encompasses the One X, One V, and One S. The One X and S are for sale in the U.S. from AT&T and T-Mobile, respectively. The One X--and its sister device, the EVO 4G LTE--were blocked from entering the U.S. last month thanks to a U.S. International Trade Commission exclusion order. The order was put in place due to patent litigation with HTC competitor Apple.

[ Does the operating system make a difference in smartphone sales? Read Android's Growth To Peak This Year, Says IDC. ]

Though issued last year, the exclusion order didn't go into effect until April 19. The fact that it has been applied to new phone shipments, and not HTC's older devices (which were the ones that infringed on an Apple patent) has taken some by surprise, not the least of which is HTC.

The One X hit AT&T's store shelves in early May, and the EVO 4G LTE was set to hit Sprint's store shelves May 18. (They are two different versions of the same phone.) AT&T sold through its initial stock and was left without One X units to sell for several weeks. Sprint was forced to delay the launch of the EVO 4G LTE.

On May 29, the exclusion order was lifted. "HTC devices have been released, as they are in compliance with the ITC's ruling," said HTC in a statement. Though both phones have now made it through customs, the damage was done. The One X is back in stock at AT&T stores, but the EVO 4G LTE has yet to fully launch.

HTC hasn't hit similar sales snags in Europe. "A bigger softness is from Europe than the U.S.," chief financial officer Chia-Lin Chang told analysts in a conference call. Instead of an import ban, Chang blamed the macroeconomic situation and highly-competitive landscape of the European market for its slow sales in Europe. "But sales in China are better than we thought; we expect China will contribute a representative percentage to the revenue this quarter."

In response, the company trimmed its revenue forecast down to $3.03 billion.

The macroeconomic argument may not hold a lot of water, though, unless other smartphone makers corroborate weak sales across the European continent. So far, they haven't.

Adding to HTC's woes, Apple filed new litigation against the company Wednesday, alleging that 29 of its smartphones still violate the same patent that One X and EVO 4G LTE did. Apple wants the ITC to ban HTC from importing these devices immediately. The ITC hasn't made a decision on the matter yet, but such an import ban would effectively kill HTC's business aspirations in the U.S.

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