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HTC may now be moving a million units of its flagship smartphone or less, slips to tenth place

Once the top smartphone seller in the U.S., Taiwan's HTC Corp. (TPE:2498) has today slipped to tenth place, according to Gartner, Inc. (IT).  The company this week announced its earnings for June, revealing that it will miss analyst earning expectations despite modest sales of its well-reviewed flagship "One" smartphone.  The struggles are the latest for the company, which has seen a dramatic financial fall from grace since late 2012.

I. The Fall to Tenth Place

The embarassing plunge could be blamed on a variety of causes:
HTC gave no hard numbers on how many One smartphones it has sold, only stating that sales are picking up.  Previously, an unnamed executive had told The Wall Street Journal that by late May 5m One smartphones had been sold.  That was roughly 2 months after the global launch, and 1 month after the U.S. launch (which was delayed to late April).

But Citigroup Inc. (C) Global Markets Inc analyst Kevin Chang estimates there may only have been ~1.2m in May sales and ~600,000 in April sales.  He commented to The Taipei Times, "HTC shipments to peak in May, stay at a similar level in June and start to decline in July."

HTC One sales appear to have seriously slid in June, after a May surge.

And reality may be even worse than that when it comes to June sales.  HTC pocketed $29B TWD ($962M USD) in May, but just $22.1B TWD ($733M USD) in June.  June's sales had erased roughly 70 percent of May's gains over April, at about twice February's record low ($11B TWD ($365M USD)).

In total HTC took in $70.7B TWD ($2.35B USD) for the quarter versus a Bloomberg analyst consensus of $72.8T TWD ($2.42B USD).  Net revenue (profit) was $1.25B TWD ($41.5M USD), well short of the $2.17B TWD ($72.0M USD) Bloomberg-surveyed analysts predicted.

HTC sign
HTC has closed several offices as part of a downsizing plan. [Image Source: Reuters]

The losses come despite aggressive cost cutting by HTC and facility closures late last year.

II. No Relief in Sight?

The future is murky for HTC. 

It's making aggressive changes on the marketing and management fronts.  It reportedly signed Robert Downey Jr. (of Iron Man fame) to a $12M USD endorsement deal, making him the face of HTC's high-tech smartphones.

Iron Man headsup
Robert Downey Jr. will reportedly give HTC marketing a boost. [Image Source: Marvel Studios]

Those high-end products include such well reviewed premium products as the overseas "Butterfly" model and the international "One" flagship device, both of which feature attractive margins.  

But overall HTC's lineup looks anemic and its recovery seems to be slowing.  There's a serious risk that HTC's long time CEO Peter Chou may step down.  Poor support for last year's mid-range devices is a troubling sign for HTC, and may be enough to scare off customers to HTC network-carried handsets.

Those things aside, perhaps the biggest looming threat is the lack of upcoming products in the pipeline, at least according to currently leaked information.  HTC is planning on launching an HTC One Mini in August that looks like a substantial step up from the Galaxy S 4 Mini.  But the Galaxy S 4 Mini is out now -- and Samsung's rumored to upgrade it around the time of the HTC One Mini launch.

HTC One Mini
The HTC Mini is arrive late to the party, so to speak. [Image Source:]

Samsung is releasing specialist smartphones (like the GSIV Active and GSIV Zoom), while HTC's lineup remains small.  And while Apple's big update -- the Apple iPhone 5S -- and a faster Galaxy S IV are rumored to be on the horizon for fall launches, there's a relative lack of compelling upcoming product from HTC in the rumor mill thus far.  That's not to mention Huawei Technologies Comp.'s (SHE:002502) upcoming Ascend P6 and Nokia Oyj.'s (HEX:NOK1V) Lumia 1020.

Sure, the HTC One impressed, but did HTC tip its hand too early and fail to follow up?  That's what increasingly looks to be the case, as the next generation of smartphones to be released over the next few months aim to erase the reviews lead HTC's flagship device briefly enjoyed.

HTC can take comfort in the struggles of Apple and Samsung.  But at the end of the day the parts of the roadmap that are leaked or public known seem to suggest HTC to be at a competitive disadvantage looking at the rest of 2013.

Sources: HTC, Bloomberg

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RE: It's a shame
By bug77 on 7/6/2013 6:00:32 AM , Rating: 2
Remember when Bill Gates' intuition told him IBM's PC will go nowhere without an operating system?
It's the same with smartphones today. You may have the best hardware, bar none, without proper (and up to date) software, you'll still leave your buyers with a bitter taste.

RE: It's a shame
By rudolphna on 7/6/2013 9:29:40 AM , Rating: 2
Heres the thing- other than security, I see no reason for an update to the HTC one software. It's perfectly fine as-is. That wasn't the case for say, my SGS2. Plus, flashing that with ICS when it came out royally screwed it up.

RE: It's a shame
By bug77 on 7/6/2013 4:18:06 PM , Rating: 2
Heres the thing- other than security, I see no reason for an update to the HTC one software.

Well, their software is buggy to the level they forgot some logs on debug level, providing an intruder with tons of location data. And look at the benchmarks of Sense'd One and the pure Android variant (there are some on gsmarena). There's no reason Sense should affect CPU benchmarks, yet it does.

It's perfectly fine as-is.

Get back to me when the rest of the world enjoys their Android 5.0 while you'll be stuck with 4.3 (at best).

RE: It's a shame
By spread on 7/6/2013 4:55:50 PM , Rating: 2
I see no reason for an update to the HTC one software. It's perfectly fine as-is.

New software means new features. You can buy a new phone from HTC every 6 months if you like but the rest of us want software updates like every other phone out there. Even Sony has better support and care for customers. Sony.

HTC deserves to go bankrupt and be an example in business classes about what not to do.

RE: It's a shame
By Chaser on 7/7/2013 1:34:03 PM , Rating: 2
Right. That's how everyone shops and compares phones. At the mall kiosks, stores, and online: future unknown updates.

But I wonder how my phone will make and take calls after this:

HTC can burn in *ell.

RE: It's a shame
By retrospooty on 7/7/2013 2:05:11 PM , Rating: 2
People like to buy cheap phones then complain they dont get updates. The fact is there are no low to mid range phones from any maker that get updates 2 years after release. It just doesn't happen. I would be bummed if I got the One X from last year and it wasnt updated, but the One S is a mid range phone. and it DID get a JElly Bean update to 4.1. That is a good thing. Anyone that buys a mid range phone with the expectation they will get updates for 2 or more years is delusional and expecting way too much from their phone.

RE: It's a shame
By name99 on 7/6/2013 2:21:23 PM , Rating: 2
The more relevant aspect of the analogy is that getting your OS from a third party results in a commodification of the HW space, which leaves zero money to be made by anyone in the space.

Google has apparently tried to avoid this trap by encouraging skinning and OS modification by the large companies rather more than MS, but this obviously hasn't worked. It's still not clear to me if the primary problem was that Google was only half-heartedly behind this, or if they did not realize before they started how utterly incompetent their HW partners were, both at SW (NONE of them appears to have created compelling customizations; even the most aggressive, like Samsung, appear to be bug-ridden and slow) and at business (they've pretty much all pissed off their customer base by developing a reputation of never upgrading their software).

The results are obvious. Even the one company that was making money in the Android space, ie Samsung, looks rather less golden than it did six months ago.
More floundering around doing what's been suggested here is not going to change anything. More models, different sizes, targeting new demographics, none of that changes the STRUCTURAL issues. It's just like the PC world --- what these companies are delivering is commodities, which means they can't charge anything but low prices, which means they have no money to do the R&D to raise themselves above commodities.

Is there a solution? Not that I can see, not as long as you want to play this game of using someone else's OS to drive your phone.
You could try to get into the Win8 game --- but there's no reason to believe that MS is going to help you out any better, it's the same game there.

The only way out is to control a critical mass of the device --- most likely the OS, but alternatively perhaps a unique HW feature. This is, of course, where Apple is, but is there space for another Apple? The cost to reproduce everything they have would be prohibitive.

RE: It's a shame
By Solandri on 7/6/2013 2:52:35 PM , Rating: 2
Remember when Bill Gates' intuition told him IBM's PC will go nowhere without an operating system?

Off-topic, but Gates' intuition told him no such thing.

Gate's mother was friends with an IBM executive who happened to be tasked with making/buying an operating system for their soon-to-be-released IBM PC. He mentioned this to her while they were having lunch together, and she told him to contact her son Bill because he ran a software company.

She tipped off Bill to expect a call from IBM about an operating system, and when Gates spoke with IBM he told them sure he could provide an operating system, even though he had none and didn't have any experience making one. He called around, found that Seattle Computer Products had something they called QDOS (quick and dirty operating system), negotiated, and bought the rights to it for $50,000. When he later met with IBM, he presented them QDOS as Microsoft DOS.

It wasn't about innovation nor intuition. It was all about having business connections, being in the right place at the right time, and having a ruthless personality which shamelessly withheld information from people for his own personal benefit. You know, the personality type which makes a manager take credit for his subordinate's work. An honest person would've said, "I'm sorry I don't have an OS, but I'm sure I can find you someone who does. Oh here's one. Here's their contact info and a bill for my time finding them for you."

RE: It's a shame
By bug77 on 7/6/2013 4:13:39 PM , Rating: 1
Well, he didn't have an OS at that time, so his intuition was he should change that.

RE: It's a shame
By cyberguyz on 7/8/2013 5:51:30 AM , Rating: 2
I think something similar could have been said about Steve Jobs after his visit to PARC and seeing the Star GUI ;)

"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation

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