HTC Posts record low profits: Has the time come?

HTC have always been an well known and trusted brand in the mobile phone market. The firm has moved along a lot in the mobile market – from selling notebooks to high end smartphones. They have been biting at the heels of their competition now for over 14 years, but on Monday HTC Corp posted record low quarterly profits and dismal product delays. HTC may have just peaked…

HTC Corporation, established by Cher Wang and Peter Chou, have a long history of generating market ‘firsts’ and stimulating innovation and growth throughout the industry. In 1998 they began work on the first wireless and touch screen mobiles, 2002 saw them announce the first Microsoft powered smartphone. Again in 2005 they introduced the first 3G Microsoft phone and later followed this up with the HTC EVO 4G in 2010, the first 4G enabled HTC One_Silver_3Vdevice to hit the USA. Since then they have made several strategic moves, such as acquiring 51% of Beats shares  in 2011 and implementing Beats technology into later devices as a major selling point. As well as this they had received “Device Manufacturer of the year” 2011 at Mobile World Congress and later went on to become the biggest mobile vendor in Q3 2011 in the US.

But now most of the shine has rubbed off and we are sadly looking at a much more fragile and withered company.  HTC have for a long time been seen to be on the back foot of the mobile game. After gaining top mobile seller in Q3 2011 – market shares plummeted to below 9% with the rise of Apple and Samsung. HTC has since released several flagship models, the HTC One X did not succeed as expected in the market and HTC’s reliance on mobile providers to wholly  advertise their devices failed in the light of Samsung’s and Apple’s harsh advertising campaigns. HTC was lost in the ‘WOW’ between Samsung and Apple. Therefore current CEO, Peter Chou, has placed a great amount of pressure on the launch of HTC’s latest flagship model for 2013, the HTC One – and has commented stating that if the phone was to fail, he would resign.

Seduced by the hype around the HTC One, announced in February, the device contains a 13 megapixel camera, Android 4.1.2, 4.7 inch 1080P screen, 2GB RAM and a quad core processor – equally matching the likes of Apple’s iPhone 5, and a possible alternative to the new Galaxy S 4. Yet as consumers begin to queue up outside their nearest tech retailers, somebody is going to have to tell them they will need to wait a little longer. After a shortage of camera parts HTC has delayed a launch of the HTC One in many markets around the world. At the end of Q1 HTC intended for availability in 80 markets world wide, but have only achieved this in 3. It does not expect, nor do suppliers, to be able to launch the HTC One in North America, Europe or Asia by the end of April – to the disappointment of many fans.

While Samsung Electronics has announced the Galaxy S 4 will be available in 155 countries by the end of April.

HTC reported unaudited net profits of T$85 million, that is compared to the T$10.9 billion same time last year. To date, the latest profits are HTC’s lowestimages since 2004. Analysts are now becoming concerned at the companies continued failure and consumers are noticing a change in company movements. HTC will face a backlash when trying to market low end devices in Q3-Q4. Nevertheless HTC has partnered with Facebook in recent weeks to announce Facebook Home, another take on an Android OS, HTC hopes that the joint work on Home and the exclusive pre install that Facebook can offer HTC on their HTC First device would be enough to draw back buyers. Sadly I don’t think this will be enough. HTC’s First will come preinstalled with Facebook Home, but apart from that will remain a low end Android phone, HTC will not have a large enough distribution or unique features to profit from the launch of ‘First’.

“The Facebook phone is not enough to turn HTC around,” said Daiwa analyst Birdy Lu.

HTC have lost their way. Several failed phones down the line, shares have halved in value over the last 12 months. HTC had betted on the HTC One being their saviour – but the delayed launch and problems with supplies is not a good omen. Now the news comes from other sources as well, that if you were indeed able to get your hands on a HTC One, and the supplier was O2 – you would not receive a charger. Well thats just dandy. This may be more up to O2’s policy makers but nevertheless it only opens up networks to flog even more junk off to consumers after purchasing a new mobile. Either way HTC have hit a bit of turbulence in their journey through the market, it is up to their management and suppliers to decide if they make it safe out the other side – or if their plane disintegrates in a storm. The public can be forgiving, I don’t feel the delay will cause much added woes for them. But HTC must be able to produce a superior devices with enough power and use behind it to get back on their track.

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