HTC Corp. (2498), Asia’s second-largest smartphone maker, posted a record 79 percent drop in quarterly profit as competition from Samsung Electronics Co. and Apple Inc. (AAPL) drove down sales of the Taiwanese company’s devices.

Third-quarter net income slumped to NT$3.9 billion ($133 million), the Taoyuan, Taiwan-based company said in a statement today. That missed the NT$4.43 billion average of eight analysts’ estimates compiled by Bloomberg in the last 28 days.

HTC, maker of the One, Sensation and Desire handsets, lacked a “sense of urgency” while “bureaucracy crept in,” Chief Executive Officer Peter Chou said in an e-mail to employees in August. Gains by Samsung and Apple’s iPhone 5 sales and stronger competition in China from unbranded, or so-called white box, phones could hamper a rebound this quarter, according to Kevin Chang, an analyst at Citigroup Inc. in Taipei.

“HTC is likely facing further share loss in the U.S. and Europe” in the fourth quarter, Chang, who rates the stock sell, wrote in an Oct. 4 report. “While HTC was doing well in China in the third quarter, we believe the dramatic price declines and performance improvements of white box smartphones have dampened HTC’s momentum in China.”

HTC shares dropped 0.9 percent to close at NT$287 in Taipei before the earnings announcement. The stock has lost 42 percent this year, lagging behind a 7.7 percent advance in the benchmark Taiex index.
Revenue Miss

Third-quarter revenue fell 48 percent to NT$70.2 billion, missing the NT$75 billion average of eight analysts’ estimates compiled by Bloomberg in the last 28 days. The company on Aug. 3 forecast revenue of NT$70 billion to NT$80 billion. Operating income declined 76 percent to NT$4.9 billion, according to HTC.

Samsung, the world’s largest maker of mobile phones, last week reported record third-quarter operating profit, buoyed by continued gains by its Galaxy phones and tablets. Sales of the Galaxy S III passed 20 million units in the 100 days after its debut, the company said last month.

Apple sold 5 million units of its iPhone 5 in the first weekend after sales commenced in nine countries on Sept. 21, it said at the time. The Cupertino, California-based company began selling the device in 22 more countries on Sept. 28.

HTC needs to “kill bureaucracy” as “we have people in meeting and talking all the time but without decision, strategic direction or sense of urgency,” Chou wrote to workers in an August e-mail obtained by Bloomberg News. “Stay firm with the hero innovations,” he wrote.

Fourth-quarter net income may drop to NT$5.2 billion, the fifth consecutive decline, on revenue of NT$76.5 billion, according to estimates compiled by Bloomberg in the last 28 days.

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