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HTC Business: It Will Get Worse Before It Gets Better

peter chou mwc 2012

Peter Chou, the co-founder and CEO of HTC, introducing the HTC One in Barcelona (2012)

The earnings season is in full swing, and it has been a bit of a roller coaster and HTC is a bit in a pothole: while others have been doing well, HTC’s expects to see its revenue fall (again) by 16% when compared to last year. This is due to many factors, but mainly to a brutal fight with giants like Apple and Samsung in which HTC was ill-equipped,: Apple can apply a huge operations/manufacturing leverage because it only produces three designs that sell in the tens of millions, while Samsung can use its awesome vertical integration and advanced semiconductors+displays to its advantage. It is also estimated that close to half of the iPhone parts are coming from Samsung, so that company benefits from Apple’s success.

On the other hand, HTC which pleased customers (wireless carriers) by producing a flurry of smartphone designs (that were all too similar) shot itself in the foot by having a confusing line of smartphones, not to mention a poor communications strategy that focuses on the niches they already “own” (it’s a good pat in the back, though). Chitika, an advertising firm says that HTC’s traffic share on its network has fallen by 60% while Apple’s share has risen by 64%. Ouch. Fortunately, the genuine passion of Peter Chou (HTC’s CEO) for its new line of product has been inspiring.

When HTC Sense doesn’t make much sense anymore

In addition to those obvious issues, HTC handsets were also popular because of the HTC Sense software, a UI layer that was designed to “fix” the shortcomings of the host operating system (Android or Windows Mobile). Since then, Windows Mobile has kicked out all such “skins”, and Android 4.0 has pushed the need for HTC Sense on the brink of irrelevance (htcsense.com has been shut down for a revamp). The HTC customizations also induce long delays in the OS update process, and that has further alienated customers (from HTC, and other brands too).

One size does not fit all, but it’s good for business

This leaves HTC with few options in a battle that will be mainly hardware/design centric. Unfortunately, at this game, both Apple and Samsung have the means or the technology to differentiate themselves very efficiently. This explains why during the past year or so, HTC products often ended-up with displays that were noticeably inferior to its Samsung or Apple competitors.

HTC One X 01

The One design was necessary to align HTC's business with the new reality

This situation forced HTC onto a new path: the HTC One series, which is basically an attempt to reproduce what Samsung did with the “Galaxy” line of smartphones: create one brand that HTC users can recognize and eventually, like. But this is going to be very difficult. It is clear that the upcoming Samsung Galaxy Next, commonly called Galaxy S3, is gathering a much larger crowd, thanks to an established legacy: the Samsung Galaxy S2 remains one of the best Android handset, even one year after its initial launch.

What now?

HTC One is actually a good (and very necessary ) idea, but it is quite a departure from the “one size doesn’t fit all” moto that HTC was/is so keen to use. It seems that this quarter should mark the bottom of HTC recent fall, as it has had a good month before Samsung comes out with the next Galaxy. Can HTC still remain one of the company that invests the most in Android software if sales are lagging? Was HTC’s investment in Beats worth $300M? Only time will tell, but in the meantime, HTC has a lot of work to do. Let’s hope that HTC’s prediction for a better future comes to fruition, because as consumers, we win by having more competitors on this market.

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