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HTC's ship is sinking – is it too late for the One to matter?

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April 8, 2013

HTC CEO Peter Chou is treading water (original images: Shutterstock [1] [2])

HTC CEO Peter Chou is treading water (original images: Shutterstock [1] [2])

Image Gallery (3 images)

Oh, how the mighty have fallen. HTC, an early champion among Android manufacturers, is in dire straits. And those straits are about as dire as they could be – with disastrous quarterly results to prove it. How did this happen? Will the HTC One be enough to pull its head above water? Read on.

Today HTC announced its results for Q1 2013. They ain’t pretty. The company’s revenues are down 37 percent from the same quarter last year. Compared to Q1 of 2011, they’re down 59 percent.

But the revenue numbers don’t paint the full picture of HTC’s troubles. Profits are down year-over-year by 98 percent. Yes, you read that correctly: a 98 percent drop in profits. Ouch.

Revenues and profits are both important. But when a company's profits are worse than its revenues, it usually means that its sales aren't keeping up with its spending. In this case, though, that spending may not be a bad thing – as much of it was likely tied to creating the company's greatest hope.

The late One

The HTC One has promising ingredients ... but will it be enough to save the company?

The HTC One has promising ingredients ... but will it be enough to save the company?

HTC is pinning its hopes on the yet-to-be-released One flagship. In fact, that yet-to-be-released thing is a big part of the problem.

See, the One was supposed to have shipped by mid-March. That didn’t happen, as supply chain problems delayed its release to mid-April (even later in some regions). Adding insult to injury, those problems were reportedly due to suppliers no longer regarding HTC as a tier one customer. Ouch again.

Making matters even worse, the One now releases at roughly the same time as Samsung’s Galaxy S4. It’s hard to say if a month’s head start would have done much for the One’s sales. But going directly up against Samsung’s marketing machine – which HTC can’t afford to compete with – can’t possibly be a good thing for HTC.

Fall from grace

The bleeding started around the time HTC partnered with Jimmy Iovine and Dr. Dre of Beats ...

The bleeding started around the time HTC partnered with Jimmy Iovine and Dr. Dre of Beats Audio

When you look at a company like BlackBerry (formerly RIM), it’s obvious what got it into hot water. The iPhone and Android turned the smartphone market on its head, but BlackBerries remained keyboard-laden clunkers that would have been right at home in 2005.

But the reasons for HTC’s struggles aren’t quite as cut and dry. Less than two years ago, at least one research company reported that HTC had the largest smartphone share in the U.S. Now it isn't even in the conversation. That's quite the dramatic fall from grace.

There were miscues. The Beats Audio partnership was a waste of money and focus. How many people do you know who have bought a phone because it had Beats Audio? Probably not many.

The Beats distraction also came at the worst possible time: right when Samsung was stepping up to the plate with improved phones and an absurd marketing budget.

Samsung would have been a formidable foe no matter what HTC did, but duds like Beats, gimmicky 3D, and a zillion phones that looked nearly identical only made matters worse.

Is there hope?

If you’re going to stake your company on one phone, the One is a good choice. Its high-end specs, premium design, and simple branding make for a promising batch of ingredients.

Then there’s the AT&T exclusive “Facebook phone.” HTC partnered with Mark Zuckerberg and company on the HTC First, the first (get it?) device to ship with the Facebook Home launcher. It isn't a premium handset, but it could be a hot commodity for Facebook-addicted teeny-boppers across the U.S.

Is there hope for a comeback? Who knows. But you get the sense that HTC recognizes its past mistakes, and is doing everything it can to right those wrongs:

  • It sold back half of its Beats shares, and pushed its Beats marketing to the sidelines
  • No more flooding the market with slightly different EVO clones or confusing X, X+, XL, XL+ branding ... now it's just One.
  • Its lone exception to that simple focus is an exclusive partnership with the world's premiere social network.

It’s hard not to root for a company that learns from its mistakes. It's making all the smart moves to right the HTC ship.

Lovable as it may be, though, this underdog is treading water. It may take the most remarkable of launches for the One and First just to keep HTC’s head above the surface.

About the Author
Will Shanklin Will Shanklin is Gizmag's Mobile Tech Editor, and has been part of the team since 2012. Will has a Master's degree from U.C. Irvine and a Bachelor's from West Virginia University. He currently lives in New Mexico with his wife, Jessica.
  All articles by Will Shanklin
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9 Comments

HTC has some good products with the G1 and nexus one. A bit less so with the G2, which at the time was one of the least community friendly android phones you could buy. Not only was the bootloader locked, but the flash was read only. The G2 never got an update past 2.3.

So HTC ships a new phone with a skin, android 4.1 (4.2 is current), an epoxied battery, and (according to ifixit) a "1 out of 10 for repairability".

So HTC wants you to buy a device with uncertain upgrades that will be usable when it's battery dies. The small market share (relative to Samsung) and locked bootloader makes community support for a pure android (without a skin) distro uncertain.

While a metal body is nice, I'd rather have a S4, at least it won't be a brick when the battery dies. The larger marketshare of samsung also makes community support more likely.

Fronty
8th April, 2013 @ 08:22 pm PDT

Things get worse for HTC too. Someone from HTC posted to twitter that the One won't be coming to Verizon wireless and for Verizon customers to instead check out the older DNA.

http://i.imgur.com/J17HBWr.jpg

I saw it reported later that HTC might work out a deal with Verizon after all but it would launch there a month or two after it launches on other carrier networks.

So on one of the largest carriers in the US Samsung gets a head start and at worst the Once won't be available at all. I suspect Verizon is well aware of how bad HTC needs the deal so they are playing hard ball with them.

Daishi
8th April, 2013 @ 09:01 pm PDT

Underdog or not, the HTC One is a spectacular device. While Samsung spends millions on advertizing rather than quality materials, and continues to prefer copying rather than innovation, not to mention a game plan to "kill Taiwan's high-tech" industry, HTC brings quality to the market. Although we seem to live in a world where ethics and honor are fast becoming endangered species, I'll put my money on HTC every time. True, errors in marketing plans occured. However, HTC learns from their past and creates products that address customer feedback. Besides, do you really want to see competition eliminated? When that happens, we all lose, big time!!! HTC is a true innovator, and as such are perhaps one of the most important companies in the world of mobile devices.

Brian Aiello
9th April, 2013 @ 02:25 am PDT

Unfortunately, HTC is already dead.

Phones do not live by quality or price--they live by branding. And HTC does NOT have a brand value.

Apples are for the "hip and trendy" (yuck! Say what you want about yourself, but you're paying for an overpriced piece of 3 years old tech)

Samsung is the "value phone", which is cool in its own rights.

Even BB, which has pretty low brand value, is known for its productivity. They're not pretty, but it's the best way (and the best price) to get your work done.

But HTC has nothing. Absolutely nothing, just like SONY-Ericson.

Savin Nay Wangtal
9th April, 2013 @ 05:07 am PDT

I'm one of the few who bought a HTC 8x for Beats by Dre. I am obsessed with music, and beats does indeed make an amazing difference. Plug it into your car stereo and it sounds like you put new speakers in your car. All that being said, I can see why a lot of people would not care.

Kristopher Seay
9th April, 2013 @ 07:21 am PDT

You should make the phone available contract-free and price competitive like the Google Nexus 4? I'd buy one.

I think a lot of people would like to buy a handset contract free, unlocked.

Simon Lie
9th April, 2013 @ 08:16 am PDT

Right now HTC is like the poor sap in the movies that's standing on a chair with their hands tied behind their back and a noose around their neck waiting for someone the kick the chair out from under them. The sad thing is that the rope is their own doing. HTC has released both last year's Flagship model One X and this year's model One with two big design gaffs: A non-replaceable battery and no means of memory expansion. Last year's One X shipped only as a 16 GB model to AT&T who was the main backer for this phone. Not only was this laughable from the standpoint that the phone was heavily promoted as an HD Camera/multi-media device, but adding insult to injury, of that 16 GB of storage only 11 GB was actually available to the user. On top of that the battery was permanently sealed into the case. Finally, after heavily promoting cloud storage, AT&T then pulled the plug on unlimited data plans. Bada-bing, bada-boom. Out go the lights.

This year HTC has doggedly stuck to their guns and released the One with a non-replaceable battery and no expandable memory. At least this year there is no 16 GB model - only 32 and 64 GB offerings. Meanwhile Samsung continues to provide memory card expansion and replaceable batteries in every smartphone, and their sales are skyrocketing. Someone at HTC is making some very bad decisions.

BleedingEdge
9th April, 2013 @ 12:14 pm PDT

I for one loved my HTC Tilt. When the new Windows 7 Phone came out and the only one with a slide out keyboard was the LG, I switched and love this phone. Now Windows 8 is out but none of the phones are offering a slide out keyboard so I have not upgraded. I love the Windows operating system and I love a positive touch keyboard. I am hoping that someone HTC, LG or who ever will make another phone with a keyboard and the new Windows 8 format. Anybody?

Craig A. Ruark
9th April, 2013 @ 12:50 pm PDT

HTC makes great phones. I own a One S and an iPhone 4S and the One S is a great phone. Although a Mac/iOS aficionado, I can say that I like the One S just as much as my iPhone. In some points it's also much nicer to use than the iPhone (which overall tops the two, even slightly).

The one thing in my opinion that HTC chose wisely is the Sense thing. I've used and played with many smartphones (part of my job) and the HTC models offer brilliant value for money and are well thought-out pieces of kit.

It'll be a shame if some bad marketing choices bring the company down to its knees.

Τριαντάφυλλος Καραγιάννης
14th April, 2013 @ 06:31 am PDT
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