TCL Communication (02618.HK) released its first quarter performance report yesterday, showing a turnover of HK$2.45 billion, an increase of 16% year-on-year, but recorded a loss of HK$246 million. The gross profit was HK$402 million, down 4% year-on-year, and the gross margin fell from 20% to 16%.
According to the 2012 annual report previously published by TCL Communication, last year's communication business sales revenue was RMB 9.774 billion, but there was a full-year loss of RMB 169 million.
The fundamental reason for consecutive losses lies in the fact that compared with the strong multimedia business, TCL has serious shortcomings in brand pull and product function and quality in the mobile phone category.
The announcement disclosed that the group sold 8.5 million units of mobile phones and accessories in the first quarter, while smartphone sales were only 1.5 million units. Last year, TCL mobile phone sales reached 42.61 million units, ranking seventh globally in total sales volume, but the proportion of smartphones was only 15.3%. This indicates that TCL currently lacks sufficient coverage of smartphone users.
Currently, TCL's mobile phone business is concentrated on feature phones and entry-level smartphones. The former has already exited the front-line market, while the latter faces fierce price wars with quad-core phones dropping to a few hundred yuan. Industry insiders suggest that this is a token effort, not worth pursuing.
Not long ago, Wang Jiayang, Vice President of TCL Group and Chief Operating Officer of TCL Communication, stated that starting from 2013, TCL mobile phones will strive to get closer to front-line brands; by 2015, TCL mobile phones aim to become a truly front-line brand. To achieve this, TCL Communication will focus on brand building, product design, and channel construction to consolidate foundations and seek partial breakthroughs.
However, compared with innovative leaders like Apple and Samsung in the front-line camp, unless there is a groundbreaking innovation in smart products, TCL Communication has a huge gap to bridge to achieve such grand goals.
Net profit from multimedia business down 32.5% year-on-year
TCL Multimedia also announced its first quarter performance report showing that as of the end of March, it recorded a net profit of HK$210 million, down 32.5% year-on-year. During the period, turnover was HK$10.26 billion, up 23.6% year-on-year; gross profit was HK$1.664 billion, up 11.2% year-on-year. Operating profit was HK$341 million, down 29% year-on-year.
In the first quarter, TCL Group's overall LCD TV sales reached 3.91 million units, an increase of 21.5% year-on-year. Domestic market LCD TV sales increased by 48.6% year-on-year, while overseas market LCD TV sales decreased by 9% year-on-year, with emerging market LCD TV sales increasing by 2.4% year-on-year. In the domestic market, the proportions of TCL smart TVs and 3D TVs in LCD TV sales reached 21.5% and 30.1%, respectively.