[One (M7) General] BarryH_GEG:
This is the heart of the story and the only part that matters. It's an analyst's note. The purpose of which is to advise shareholders of trends, positive or negative, that may affect their holdings. It's isn't emotional and analysts are judged based on accuracy of their predictions so when they issue notes it isn't taken lightlty. KGI, the brokerage the analyst works for, is a multi-billion dollar company and not some storefront on a side street. The camera sensor shortage could also be why the One for China has an 8MP camera.

http://www.kgieworld.com.tw/Index/Index.aspx

"KGI Securities lowered its estimate for the HTC One from 4 million units to between 800,000 and 1.2 million units, explaining that its channel checks indicate production bottlenecks related to the phone's voice coil motor (VCM) and compact camera module (CCM) on its UltraPixel camera.

As a result of the revision, KGI predicts that HTC will ship 10.5 million smartphones in the first half of this year, far below its previous forecast of 14 million to 15 million units, it wrote in a note to clients.

"We believe the production restraints that UltraPixel faces will severely limit HTC One shipments," KGI analyst Kuo Ming-chi said, citing the low production yields of VCM"​

And other analysts also have a pretty grim view of HTC's future which has created a sell-off and tiggered stop-sales of the stock on the TW exchange becuase it plunged too far too fast. As an example of how bad it is, a shareholder that had 1K shares of HTC stock in April 2012 at $80 USD ($80K total value) would have seen the value of their stock depreciate by 84% to $12,800. There can be no question or debate that HTC is an incredibly troubled company. The only real question is can they pull back from the brink?

Shares of HTC plunge on cautious Q1 guidance

2013/02/05 12:10:59

Taipei, Feb. 5 (CNA) Shares of smartphone vendor HTC Corp. took a beating Tuesday morning on the company's cautious guidance for the first quarter of this year, dealers said.

Tuesday's selling may have come largely from foreign institutional investors after Citigroup cut its target price for HTC shares to NT$205 (US$6.93) from NT$250 following the smartphone vendor's gloomy forecast Monday, they said.

As of 11:36 a.m., shares of HTC had fallen by the daily maximum of 7 percent to NT$266.00, with 8.73 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.59 percent at 7,878.17.

"Many investors were stunned by HTC's first quarter sales forecast. Although the company has launched its popular Butterfly model, it seems that the new product will not be able to boost its sales," Horizon Securities analyst Benson Huang said.

At an investor conference Monday, HTC projected its sales for the first quarter at between NT$50 billion and NT$60 billion, compared with NT$60 billion recorded in the fourth quarter of 2012.

HTC also estimated its gross margin for the first quarter at 21-23 percent and its operating margin at between 0.5 and 1 percent, compared with a 23 percent gross margin and 1 percent operating margin in the October-December period.

"From what I understand, the HTC Butterfly model is suffering from a component shortage, which has hurt shipments of the product," Huang said. "That has kept many consumers waiting in Taiwan and Japan."

Huang said the new model is not likely to make a greater contribution to HTC sales until the second quarter.

"But what concerns me more is that HTC is facing depressed profit margins as it vies for a larger share in the China market, where low cost models have become mainstream products," the analyst said.

Huang said his brokerage has estimated HTC's gross margin in China at only about 10 percent on escalating price competition there, which could further erode the company's bottom line.

"Look at the thin operating margin forecast for the first quarter. I suspect HTC will have to increase its operating costs to broaden its distribution network in China," Huang said.

Based on HTC's latest guidance, the smartphone vendor will likely post earnings per share of less than NT$1 in the January-March period, down from NT$1.21 in the fourth quarter, the analyst said.

"It was no surprise that Citigroup cut its target price on HTC shares and maintained its 'sell' recommendation on the stock," Huang said. "It's possible that foreign institutional investors continued to cut their holdings in the stock this morning."

On Monday, foreign institutional investors were net sellers of 1.64 million HTC shares on Taiwan's stock exchange.

Huang said the stock could face more downward pressure, "and if it cannot hold itself well above NT$230-NT$240, the stock could test the next technical support level around NT$200 shortly."​