Just 3 years ago, HTC was the industry’s darling. It had moved from clunky old designs to a a sleek new range of phones and was adding in ‘smart’ by the bucket-full. It’s just announced a 70% drop in first quarter profits. So what went wrong?
Before 2007, you could buy an HTC phone – but not with an HTC logo. All of the early Windows-based smartphone from O2 and T-Mobile were actually made by HTC, but no one knew who the company was. The transition from making phones for others, to making phones under its own brand, went really smoothly and HTC’s sale revenue rocketed as a result.
Android’s explosion into the phone market was just that, explosive. HTC took the lead with designs like ‘Desire’ and the reviewers across the world swooned.
Unfortunately for HTC, the major brands are now flexing their muscle in the smartphone market and they are taking no prisoners when it comes to marketing, styling, design and functionality. Apple’s iPhone has put the flag firmly atop the hill and Samsung’s Galaxy legion is preparing onslaught after onslaught on the number one spot over the next 2 years.
In comparison, HTC’s design and marketing teams are struggling to keep up.
Revenues for Q1 2012 are down around 35% and profits are down 70%. The immediate problem is that investors get nervous and want to run away. Already, the stock market valuation for HTC shares is down almost 7% and it will take some miracle for that number to climb back.
The experts agree with KitGuru. The gorgeous Jasmine Lu from Morgan Stanley commented “We view HTC as a product cycle company but think that structural changes in the smartphone market might leave it not well positioned to regain share quickly, simply based on one decent device”. In a nutshell, Morgan Stanley thinks that they’re screwed.
HTC has big hopes for the ‘One’ products, powered by the latest in Qualcomm chip technology – but there seem to be issues in getting production up to the required levels. Any reduction in capacity will impact HTC negatively.
Ultra scary for HTC? Unit shipments are predicted to grow from 7.5m to around 12m as we move from Q1 to Q2. Telling the world that unit shipments may almost double, while Morgan Stanley starts to sound your death knell is a poor place to be.
KitGuru says: Worst case scenario, HTC can always go back to making product for other people – but we’d like to think that it has more fight left in the locker.
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