HTC feels the heat – Mobile World Live

HTC feels the heat

24 NOV 2011

Is the honeymoon over for HTC? Thanks to several years of stellar sales the Taiwanese firm has transformed itself from an unknown OEM maker into a leading smartphone brand. Just look at recent figures from Canalys, which had HTC as shipping more smartphones in the lucrative US market in the third quarter (5.7 million) than anyone else.

So why has the firm just slashed its revenue target by 20 percent for Q4, the most vital quarter for handset sales?  It had already lowered expectations for the quarter, saying it would not match its record-breaking Q3 – but a warning this close to the Christmas shopping season suggests something has gone seriously awry. It certainly caused alarm bells to ring among investors, who sent HTC’s shares down to a 16 month-low this week.

The firm faces a number of issues, some cyclical and others that are more deep-rooted. Firstly, and the easiest to explain, was Apple’s relatively poor showing in Q3, which was due to its devotees waiting for the release of the new iPhone 4S rather than any switch to rival brands such as HTC. The new iPhone was released in October and will surely be flying off the shelves during the imminent Christmas shopping frenzy.

Then there’s the return to the fray of Nokia with its first Windows Phone devices. Whether these will set the world alight is a matter of current debate (Nokia says they will, analysts say they won’t); but it’s safe to say that if one were disposed to buying a Windows Phone they would surely opt for the shiny new (and heavily marketed) Nokia Lumia over, say, the HTC Radar.
 
More worrying for HTC is the recent developments around Android, the platform that has served as the springboard for its success in recent years. It faces formidable competition here from the likes of Samsung, which has cornered the high-end Android market with its flagship Galaxy range, and in the low-end from Asian rivals such as ZTE and Huawei, leaving HTC to do battle in the mid-range market with the likes of Sony Ericsson and LG. This is something of a climb-down for a firm that launched the first ever Android phone (the HTC Dream/T-Mobile G1) and could once claim to offer the platform’s flagship device in the pre-Galaxy era: the HTC Desire.

Another worrying unknown for HTC (and others) in the Android ecosystem is what happens to Motorola following its acquisition by Google. While Google has denied plans to show any favouritism to its newly-acquired handset business, simply having the search giant’s weight behind it should be enough to re-establish Motorola as a significant player.

The combination of a crowded Android handset market, coupled with a resurgent Nokia, a Google-backed Motorola and (maybe) even a revived RIM therefore has the potential to eat into HTC’s market share gains of the last few years. Unless, of course, the firm can refresh a handset roster that is currently lacking a killer device.

Unfortunately, HTC seems to have taken its eye off its handsets portfolio in recent months in favour of wading into the device industry’s pernicious patents war, finding itself fighting legal battles on several fronts. It has made some missteps here too. On the same day it announced its revenue downgrade it also hinted that it is now trying to wiggle out of its acquisition of S3 Graphics, a purchase it only made to bolster its patents battle with Apple, which now looks like a dud buy following the ITC’s ruling in the case in favour of Apple.

Whether Q4 is a mere blip or the beginning of something more serious remains to be seen, but it’s safe to assume that HTC’s years of triple-digit shipments growth are now behind it. 
 
Matt Ablott


The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members