Stock Talk: HTC's Q3 loss isn't good, but neither is it unexpected

The question remains, though: How (and can?) HTC regroup financially to compete in this industry? 

Earlier this week HTC Corp. published its unaudited results for the third quarter of 2013. Despite the number of headlines making a big deal out of the company’s first quarterly loss (yes, it lost money this quarter), the news was easily anticipated.

Like many public companies, HTC shares its business outlook in every quarterly press release. Last quarter it said to expect $50 billion to $60 billion (local currency) in revenue, and it expected an operating margin as low as -8 percent.  In actuality, HTC posted slightly less revenue ($47.1 billion), and the operating margin was slightly better than the worst-case scenario in its outlook at -7 percent. 

How did the market respond? The stock is actually up 1.5 percent today. That’s a tiny move for a tech stock, so it pretty much tells us Wall Street yawned at these numbers. 

It’s unfortunate that products like the HTC One and the HTC First “Facebook phone,” released earlier this year, didn’t turn around the company’s fortunes.  I honestly don’t know what these guys should be doing to fix things. There is no question HTC makes good products. People have long respected HTC’s design skill and product quality. But it clearly isn’t enough to sustain the business. The mobile business is now heavily concentrated around Android and iOS, and in the Android market it’s practically impossible to compete against Samsung. Not only does Samsung make by far the largest number of (very good quality) phones, but it has strong control over much of the supply chain by making its own screens, memory, and more.

AS WE'VE SAID TIME AND TIME AGAIN — THE PRODUCTS AREN'T THE PROBLEM.

Still, HTC isn’t in imminent financial danger quite yet. Last time we saw HTC's balance sheet, it had about 14 times as much cash on hand as compared to this Q3 operating loss. Unless revenues plunge from here, HTC probably can get back to profitability with some careful cost cutting — which, yes, unfortunately often involves cutting people, which happened recently as HTC America confirmed it's laying off 20 percent of its employees. But contrast this with BlackBerry, which just announced plans to cut 40 percent of its staff, reduce operating expenses by 50 percent — and it still faces a heavily declining service business, which threatens to re-ignite the company’s cash burn rate even if management puts out the current fire.

What’s your take, folks? What strategic options should HTC implement? Should HTC look to sell itself? Shut down the business? Find another way to compete in the market somehow?

What options do these guys have to remain relevant?