iPhone and Galaxy hit HTC hard

HTC, the world's fifth-largest smartphone maker, has revealed a third-quarter net profit drop of 79 percent, missing forecasts, as its flagship phones failed to keep pace with Apple's iPhone and Samsung's Galaxy range.

The former contract maker has been suffering a sharp decline in its fortunes since the second half of 2011 following a fairytale ride when it built a strong global brand with phones based on Google's Android software.

Unaudited July-September net profit was $T3.9 billion ($A130 million), down from $T18.7 billion in the same period a year earlier and $T7.4 billion in the previous quarter. Earnings had been expected to drop to $T5.57 billion, according to a Thomson Reuters I/B/E/S survey of 21 analysts.

"I expect HTC's margin was down 2 basis points compared to Q2 due to a change of product mix. HTC was cutting prices and its low-end phones were selling better," said Yuanta Securities analyst Dennis Chan in Taipei.

"The new models we saw in the past few weeks are not going to change the game. It will be able to keep its market share, but we won't see much pick-up," he said.

In the past few weeks, HTC has aggressively rolled out new models to regain market share in the fourth quarter, specificailly the HTC One X+, an upgraded version of its high-end flagship model last Tuesday, both running on Google's operating system.

Last month, it also introduced two colorful models running Microsoft's Windows Phone 8 software, the Windows Phone 8X and the Windows Phone 8S, among the first in the market.

HTC's third-quarter revenue was $T70.2 billion. The company said in August it expected its third-quarter revenue to be $T70 billion to $T80 billion, compared to $T91 billion in the second quarter.

HTC shares closed down 0.86 percent at $T287 before the earnings were released, while the broader market fell 0.97 percent.

"Before we turn more structurally positive, we would like to see its flagship models contributing a large portion of its business, as its strategy of reducing its number of models leaves it much in need of a hit model for 2013. Until then, we see margins posing a downside risk," wrote Goldman Sachs analyst Robert Yen in a research report.