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New products to return Taiwan's HTC to growth by year end

By Michael Gold

TAIPEI (Reuters) - Taiwan's HTC Corp will return to growth in the final three months of 2014 after a bruising few years that has seen market share dwindle amid steep sales declines.

The October-to-December period will see the company's first rise in year-on-year total revenue in 12 quarters, company chief financial officer Chialin Chang said after the firm's quarterly investor conference.

"The growth will come from a kick in momentum for our flagship phone as well as new product introductions," Chang said.

Those products likely will include HTC's first-ever phone based on the Windows operating system from Microsoft Corp, a partnership Chang said was "going well."

HTC is also working on a smartwatch with Silicon Valley internet giant Google Inc, but Chang wouldn't say when the product would hit the market.

But it will take more than a few new gadgets to convince company watchers that the firm has turned a corner.

Sales at the beleaguered phone company, which once sold one out of every 10 smartphones worldwide, have only notched two months of year-on-year growth out of the past 32.

Total third-quarter revenue is also likely to decline slightly compared with the same period of 2013.

The firm will look for efficiencies in its sales and marketing operations in order to maintain profitability, Chang said, adding that it would not reduce headcount.

These cost-saving measures have already started to take effect, as HTC previously reported higher-than-expected second-quarter net profit of T$2.26 billion.

The firm is also expecting to eke out a slight net profit in the third quarter, Chang predicted.

Chang noted that the firm is willing to sacrifice profit margins in order to drive volume, though he emphasized that HTC would not sell its products at a loss in exchange for market share.

HTC's share of the global smartphone market was a slim 1.4 percent in the first quarter of 2014, according to research firm Gartner.

As Apple Inc likely prepares to launch a new large-screen iPhone model, industry watchers remain skeptical that HTC can return to a steady growth model.

"Given the shortened life cycle of smartphones and the introduction of Apple's new iPhones, we believe HTC's recovery in the second quarter is temporary," SinoPac Securities analyst Calvin Huang wrote in a research note issued ahead of the quarterly conference.

BRAND IMAGE

Many blame HTC's lack of a compelling message and failure to stand out from competitors like Samsung Electronics Co Ltd and China's Xiaomi Inc an increasingly important factor as smartphones, especially high-priced, high-margin models, no longer sell in the huge volumes of the past.

Growth in the worldwide smartphone market will slow to 23 percent this year from 39 percent in 2013, according to researcher IDC. This will be accompanied by a drop in average selling price from $335 in 2013 to $314 in 2014, IDC said.

(Editing by Matt Driskill)

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