HTC 2008 Annual Report Download - page 20

34 35
E. Analysis of Business Results
Innovation, streamlined business operations and the ability
to respond quickly to market opportunities and challenges
have won for HTC another exceptional year of growth.
Despite worsening global economic conditions, HTC turned
in especially strong results during the second half of last
year with continued promotion of the flagship Diamond line
of products and the launch of the world's first mobile phone
designed around the Android operating system. Revenues
for 2008 reached NT$152.6 billion, an increase of 28.7%
over 2007.
ODM sales account for an increasingly small fraction of
overall HTC sales - reflecting the corporation's stress on
promoting its proprietary brand in recent years. ODM sales
accounted for less than 10% of the corporate revenue
stream in 2008. Therefore, while HTC's overall mobile
phone sales grew by just 21%, Non ODM sales registered
in at a significantly stronger 40%. Average revenue per unit
sold rose in 2008 to NT$12,085 (from NT$11,364 in 2007) -
a reflection of shrinking ODM sales and the increasing
importance of 3G phones in the HTC portfolio. In terms of
accounting, 2008 saw HTC begin treating employee
bonuses as an expense item. Also, early application of
Statement of Financial Accounting Standards (SFAS) No.
10 means that HTC now recognizes the value of inventory,
better reflecting the true relationship between products and
cost, and now counts provisions for product warranty and
write-downs of inventories and the reversal of write-downs.
Raising operational effectiveness and streamlining cost
structures are keys to the success of HTC business
operations. Executive-directed efforts at such are already
showing results. Gross margin, a key performance
indicator in the converged phone sector, slightly decreased
in 2008 to 33.6% (pre-employee bonus); 0.3 percentage
points over the 33.9% (adjusted)1achieved in 2007.
Seasonal variance in gross margin this past year reflected
the combined influence of products and sales efforts. A
one-time obsolescence write-off caused the 0.5 percentage
points slip in gross margin recorded during the second
quarter, while a restructured HTC product offering resulted
in a slight drop in gross margin during the third quarter.
While a fourth quarter drop in the value of the euro against
the NT dollar, rise in ODM orders and new strategic pricing
of T-Mobile G1 mobile phones saw gross margin slide to
30.1% (pre-employee bonus), net operating margin (pre-
employee bonus) remained at 22.0%. Gross margin from
the sale of HTC mobile phones designed on the Windows
2OO 8 HTC AN N UAL REPO RT III. Business O perations
NT$B
Revenue
08Q1
-
15
30
45
10
25
40
5
20
50
35
0%
15%
30%
45%
10%
25%
40%
5%
20%
50%
35%
08Q2 08Q3 08Q4
38.6%
2 8 .9 % 3 0 .1 %
21.4%
YoY
9,918
1 2 ,0 2 7
1 1 ,3 6 4
12,085
On 18 November 2008, Microsoft held "Touch Windows Mobile" in Tokyo, Japan. At the event,
Microsoft Japan spokesperson Yu Sasamoto joined HTC Nippon Country Manager David Kou to
introduce the latest and most popular touch mobile phone models to Japanese consumers.