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HTC First flop is another painful loss for struggling Asian OEM

After early delays due to a snub by a camera part supplier and issued with the anodized finish on the black model, HTC Corp. (TPE:2498) is starting to see sales of its HTC One 1080p flagship Android smartphone pick up steam.  But in the face of growing employee defections and failures of other key products, HTC still appears to be in very bad trouble.

I. First is a Flop

The smartphone industry is one of tech business's most viciously competitive sectors and is not for the faint of heart.  HTC bet big with its HTC First, and it appears to have lost big.

After a much-hyped April launch event, partner Facebook, Inc. (FB) promised HTC a period of exclusivity on its Android reskin "Home", which the HTC First comes preloaded with.  Such exclusivity could have given some customers incentive to buy the HTC First.  Instead, Facebook went back on its original plan, releasing the reskin to HTC's competitors like Samsung Electronics Comp., Ltd. (KSC:005930).

In addition to the exclusivity loss, Facebook's Home suffered horrible reviews from Android users who complained that it was clunky and at times nonfunctional -- nothing like the slick appearance Facebook gave in its media preview.  Sales of the HTC First have been nonexistent, as evidenced by the recent price cut from $99 USD to 99 cents.  A source close to the company tells The Verge that the hyped handset has been "a disaster".
HTC First
Reportedly the phone may be discontinued.

II. Employees Jump to Other Firms

Meanwhile HTC is suffering internal issues as well, bleeding employees.

It's important to take the wave of defections and departures with a grain of salt; after all many of them come from the marketing department, and new marketing chief Ben Ho is in the midst of a major revamp to the company's marketing direction.

That said, the situation at HTC is rumored to be struggling to pay top engineers and marketers the top salaries that its more-successful rivals are offering.  One source close to HTC's user design unit, led by Drew Bamford in Washington State, tells The Verge, "Anyone who's heard of them in Seattle doesn't want to go work for them right now. They're like T-Mobile two years ago.  They're in utter freefall."

HTC's Chief Product Officer, Kouji Kodera, reportedly quit the company last week.  Other recent departures include Jason Gordon, the company's vice president of global communications, global retail marketing manager Rebecca Rowland, director of digital marketing John Starkweather, and product strategy manager Eric Lin. And we’ve just learned that HTC Asia CEO Lennard Hoornik has also left the company.

Mr. Lin and Ms. Rowland have joined Microsoft Corp. (MSFT) while Mr. Starkweather has joined AT&T, Inc.'s (T) ranks.  Mr. Lin fired a parting shot at his former employer, writing:

It's unclear whether it’s the cause of or effect of the departure, but HTC's Marketing CMO Ho is reportedly preparing to transfer the marketing and product development departments back to Taiwan (from Seattle, Washington).

It remains to be seen if HTC will suffer its highest profile loss yet -- the departure of its long-time CEO Peter Chou.  Mr. Chou promised to step down if the HTC One was not a success.  While the handset is seeing modest sales, it's reportedly being heavily outsold by Samsung's Galaxy S IV, which moved 10 million handsets in under four weeks.

III. A Road to Recovery?

Ultimately, some industry observers question if HTC can continue to compete.  Apple, Inc. (AAPL) is king of supply negotiations and has pricing and parts inventory flexibility that HTC can't hope to match.  Plus it has its own international retail footprint dedicated exclusively to marketing its products.  HTC doesn't have that.

Likewise Samsung has unique advantages of its own -- via its display and processor units it makes much of its own hardware.  If Samsung needs a component, in most cases it doesn't have to rely on volatile suppliers -- it can simply make it itself and pocket the savings.  Again, HTC lacks this kind of capability.
Nokia sign
HTC could take a page from Nokia's book in its recovery. [Image Source: AFP]
As financial dip towards the red, handsets flop, employees leave, and suppliers squeeze HTC harder, things are looking bad for the Asian Android OEM, which is currently the fifth largest Android phonemaker behind Samsung Electronics Comp., Ltd. (KSC:005930), LG Electronics Inc. (KSC:066570), Huawei Technologies Comp. (SHE:002502), and ZTE Corp. (SHE:000063).

At this point about the best case scenario for HTC appears to be following a path similar to Finland's Nokia Oyj. (HEX:NOK1V) who downsized and restructured as a smaller, leaner competitor.  Nokia recently returned to profitability, albeit with a sales volume far from that of its glory days.  Perhaps HTC could hope for a similar outcome, but it's clear for now that it's farther than ever from the top and continuing on its downard spiral.

Source: The Verge

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RE: Too Bad
By Mint on 5/22/2013 2:34:06 PM , Rating: 1
Why is it so hard for people to understand why the S4 is selling so well?

A lot of people want a removable battery. My sister had an Experia X10, and was happy that she could replace the battery after it died. That's not the case with the Z or the One.

People clearly like AMOLED as well, or Samsung wouldn't be putting it in their high end phones. They manufacture LCDs as well.

RE: Too Bad
By erikiksaz on 5/22/2013 5:33:31 PM , Rating: 2
I don't think you understand why it's selling well either.

It's not because of the removable battery nor the AMOLED. The average consumer doesn't know/care about those features. And remember, we are not the "average" consumer. The reason I know this is because of friends that work in the business. The average customer walking into the AT&T store doesn't care about 1080p screens nor Snapdragon processors. They either want (a) to pay as little as possible, or (b) go by what their friends own or what they've heard is a good product. They don't read countless reviews on the web, let alone 10 page reviews on Anandtech and other similar sites.

In the end Samsung's meteoric rise is due to their huge allocation of funds towards marketing. Same with Apple.

And the lack of marketing is why I'm guessing that the marketing folks from HTC were let go. I don't even recall hearing/seeing any ads for HTC in the past couple years except for the Beats addon.

RE: Too Bad
By Reclaimer77 on 5/22/2013 6:50:53 PM , Rating: 2
It's not because of the removable battery nor the AMOLED.

Yeah and your full of it. I can't count the number of times I've read someone state this, in clear terms, that a removable battery is a MUST in a phone.

And sure, people may not care about AMOLED as a technology, but they sure like the way Samsung calibrates it. And even if you don't "care" about 1080p, your friggin eyes sure know it looks good when you see it!

They either want (a) to pay as little as possible, or (b) go by what their friends own or what they've heard is a good product.

LMAO ok, got a survey to back that up? Brand recognition isn't even on your list?

In the end Samsung's meteoric rise is due to their huge allocation of funds towards marketing. Same with Apple.

But nothing to do with the actual product? It's just all marketing? Yeeeah put down the Haterade.

RE: Too Bad
By Mint on 5/23/2013 2:20:53 AM , Rating: 2
Anyone who has ever owned portable products - cameras, phones, laptops, shavers - knows that batteries go bad. Easy replacement is a must for many people, and the S4 is the only high end phone providing it.

You don't even need to have heard of AMOLED to be attracted by it. You pull out your current phone, see bright colors and punchy contrast on an S4, and think "wow, that's a nice screen".

I don't know why you think someone needs to read a bunch of reviews or be an advanced buyer to understand these two exceedingly simple points.

Does Samsung have good marketing? Of course. But make something that checks all the boxes at a good price and you can succeed even without it. Look at Vizio's HDTV success.

RE: Too Bad
By luhar49 on 5/23/2013 1:55:15 PM , Rating: 2
I have never had to change a battery on my phone.
Never had a phone battery go bad within the time of my contracted 2 year usage period. Traded it in afterward and got a new phone.

Carry a portable charger now in my bag for emergency top up. Otherwise I have a charger at home and office. So changeable battery is not a factor for me.

"I modded down, down, down, and the flames went higher." -- Sven Olsen

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