HTC: 'Quietly brilliant' or 'quietly irrelevant'?

HTC's tagline is quietly brilliant. The smartphone maker's second quarter results and third quarter outlook indicate that the company may become quietly irrelevant.
The Taiwanese company's second quarter results  missed estimates with a net profit of NT$7.4 billion on revenue of $91.04 billion. (That's But the outlook for the third quarter was more worrisome. HTC projected third quarter revenue of NT$70 billion to $NT80 billion.
In other words, HTC launched a series of new products in the second quarter -- HTC One, Desire, EVO 4G LTE and Droid Incredible 4G LTE and barely held the fort. HTC's outlook indicates that those new devices are aging rapidly.

Barclays Capital analyst Dale Gai said that HTC could be "quietly irrelevant" if it doesn't get its act together. Meanwhile, HTC offered little direction on strategy or plans to cut costs. Gai said that HTC may lose cloud with carriers over subsidies and mostly compete on price.
The issue for HTC is that it just can't compete with Samsung on scale or marketing. Like Nokia and RIM, HTC is looking at being collateral damage as Samsung and Apple form a smartphone duopoly. As Knowledge@Wharton noted, the smartphone industry is due for a shakeout.
Macquarie analyst Daniel Chang handicapped HTC's outlook and earnings on Friday:

As we pointed out, Apple and Samsung will have a combined market share over 70 percent in 4Q12 if our and the street’s forecasts of iPhone shipments (60m units) and Samsung sales (60m+) are correct. This implies HTC may face a larger drop in shipments in 4Q12 since HTC’s target market overlaps in various regions with these two giants.

HTC's master plan is to grow its share of China, increase marketing and sales efforts in Europe and North America and continue a push into Asia's various markets.
Simply put, HTC's playbook will look more of the same. HTC has plenty of cash, but so it won't disappear. Instead, HTC could be on the path toward being another irrelevant smartphone maker without a dramatic move.

Mobile internet demand boosts

Allot Communications (ALLT.TA) (ALLT.O), which supplies technology that allows telecoms operators to monitor and allocate bandwidth, posted a forecast-beating rise in quarterly profit as revenues rose more than 40 percent, helped by surging demand for fast internet on mobile devices.
However, the initial positive reaction that sent Allot's Tel Aviv shares 2.7 per cent higher by the close was tempered by concern over deal flow and the company's simultaneous announcement of its second acquisition in four months.
Allot's Nasdaq-listed shares slid 7 percent to $22.96 in early trading after Chief Executive Rami Hadar told a conference call that while deal flow was healthy, the deal-closing process is taking longer because of pricing issues in a challenging economic environment.
"They had a great quarter," said Northland Capital Markets analyst Catharine Trebnick, who rates Allot as "market perform" with a $28 target. "But investors are confused."
She cited worries over longer contract negotiations as well as the announcement that it plans to buy Israeli start-up Oversi Networks for $16 million in cash.
Traditional telcos and mobile operators are experiencing high demand for bandwidth because of strong sales of iPhones, iPads and Android-based mobile phones and devices, but providers are seeing revenue declining as unlimited data plans have grown more popular.
"Allot is benefiting from growth in mobile data and growth in data traffic in general," Nachum Falek, Allot's chief financial officer, told Reuters on Tuesday, adding that much of the rise in investment in expanding networks' bandwidth comes from streaming movies and video clips.
Video, Falek said, is likely to account for 60 to 70 percent of traffic in the next few years, up from 42 percent currently.
Allot's equipment allows telecoms providers to monitor data traffic and allocate bandwidth to where it's needed most - users streaming video at the expense of a slightly longer wait for another customer expecting a large file via email, for example.
"You want to see streaming video without buffering, but you don't mind getting an email a second later," Falek said.
Europe is Allot's largest market, and it also sells to Asia and Latin America. However, the company sees the United States as a key growth driver after a U.S. court ruling two years ago that allowed Internet service providers to slow traffic to sites such as YouTube or Hulu.
"The United States is a huge market in terms of opportunity," Falek said.
Allot earned 15 cents per diluted share excluding one-off items in the second quarter, compared with 10 cents a year earlier. Revenue rose 43 percent to $26.4 million.
The Israeli company was forecast to earn 14 cents a share on revenue of $25 million, according to Thomson Reuters IBES estimates.
Its planned purchase of Oversi, a provider of media caching for Internet video, follows its acquisition of Ortiva Wireless in May and is expected to close in the third quarter.
In addition to cash, Allot will pay up to $5 million based on Oversi's performance in 2012. Oversi is expected to contribute $2 million to Allot's quarterly revenue and reduce earnings per share by 2 cents in the fourth quarter before breaking even by the first quarter of 2013, Allot said.