HTC profits double as smartphone demand grows

Taiwanese smartphone maker HTC has reported that its profits more than doubled in the three months to June on growing demand for its phones.

HTC said it had made a net profit of 17.52bn Taiwanese dollars ($608m; £380m) in the period, up from NT$8.64bn during the same quarter last year.

On Sunday, the phone maker it had sold record number of phones in June as sales surged 88% to $1.55bn.

HTC is the world's third-biggest mobile phone maker by market value.

"The second-quarter result was pretty solid," said Bonnie Chang of Yuanta Securities

"Now the market will wait to see if the guidance for the third quarter can also beat the street expectation, which is a 5-15% month-on-month growth in sales," she added.

Growing competition

One of the biggest reasons why market watchers will keep a keen eye on the guidance for third quarter is the increased competition facing the Taiwanese firm.

Last month, Goldman Sachs removed the firm from its conviction buy list - a list of stocks that the investment bank expects to outperform the market - citing intensifying competition in both the smartphone and tablet markets.

The removal of HTC from the list led to a fall in its share price as investors became wary of the company's long-term prospects.

However, better-than-expected sales numbers for June released earlier this week saw the company regain investors' trust and the share price rose again.

Analysts said HTC had been maintaining steady growth and the future looked bright for the firm.

"I anticipate that they are very well positioned to take their growth story forward," said Melissa Chau of IDC Asia-Pacific.

Growth concerns

However, Ms Chau said that for the company to be able to maintain its strong growth it would have to address some key issues.

She said that while HTC had been able to boost its production numbers, it was lagging behind competition when it came to distributing its phones effectively.

"Some of the other players are much better placed and have had a longer relationship with service providers," she said.

"HTC needs to have a much better reach, when it comes to distribution and sales networks," she added.

Ms Chau also added that one of the biggest hurdles that HTC faced was whether it could develop a successful cheaper version of the smartphone.

She explained that a big chunk of the growth in the smartphone market was likely to come from the entry level segment, where consumers look for cheaper high-tech gadgets.

"HTC tried to capture that market with the HTC Smart, but that went nowhere," she said.