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HTC may have only sold 6 million smartphones in Q3, according to analysts; company posts its first loss

Despite a slick body design and strong reviews, a mixture of production/supply issuesintellectual property concerns, and ineffective marketing have sunk sales of HTC Corp.'s (TPE:2498flagship "One" smartphone.  

I. HTC Sees Slumping Sales, First Loss

According to Taipei-based Citigroup Inc. (C) analyst Kevin Chang, who spoke to The Taipei Times, sales of the flagship HTC device may have fallen to between 2.1 and 2.4 million units in Q3 2013. This is a dramatic fall for an OEM that was once America's top smartphone seller (in Q3 2011).  

Aside from slow sales of the One, HTC has also suffered from production issues with the case of the HTC One Mini, which launched in July.  Reuters reported only 200,000 units or so of the mid-range Android device were shipping per month.   Bloomberg reports that HTC achieved a mere 2.8 percent of global smartphone sales, or around 6 million units.  To put that number in context, HTC moved 5.6 million units in the U.S. alone at its peak in Q3 2011.

Sales of the HTC One Mini were limited by production problems in Q3 2013.

Throughout 2012 and 2013 HTC has struggled financially, and in Q3 the worst-case scenario was realized as HTC posted its first quarterly loss, according to the company's unaudited financials release.  HTC saw an operating loss of NT$3.50B  (~$119M USD), a net loss of NT$2.97B (~$101M USD) on a revenue of NT$47.05B (~$1.6B USD).

HTC has been in part victimized by a global smartphone slowdown.  Whereas rivals like Samsung Electronics Comp., Ltd. (KSC:005930) -- and to a lesser extent Apple, Inc. (AAPL) -- have a more diverse product lineup to fall back on, HTC all-smartphones lineup left it especially vulnerable to slowing smartphone sales.

Founded in 1999, HTC produced smartphones for other companies as an original design manufacturer (ODM) until 2006 decided to make a name for itself selling products under its own brand as an OEM.  In its early days as an OEM HTC became one of the first major champions of the Android platform and benefited from the surge in interest in what would become the world's top smartphone platform.

Peter Chou
CEO Peter Chou led HTC to early success as an OEM via the hot Android platform.
[Image Source: Android and Me]
But even as Android smartphones today encompass nearly 4 out of every 5 smartphones sold worldwide, HTC has been passed not only be Samsung, but by LG Electronics Inc. (KSC:066570) and a variety of Chinese OEMs -- including The Lenovo Group, Ltd. (HKG:0992), ZTE Corp. (SHE:000063), and Huawei Technologies Comp. (SHE:002502).

II. Windows Phone? An Exit or a Bane?

A lone ray of hope was that HTC's Windows Phone lineup (composed of the HTC 8S and 8X) saw relatively strong sales of 400,000 - 500,000 units according to various estimates, including the Interactive Data Corp. (IDC).  That was good enough for third place in the Windows Phone market behind Nokia Oyj. (HEX:NOK1V) and Samsung.

The HTC 8S Windows Phone

Bloomberg reported that Microsoft Corp. (MSFT) has offered to remove a potential ban on HTC's lineup if it commits to Windows Phone.  That report comes in the wake of news that Nokia -- Microsoft's Windows Phone partner -- had secured a preliminary injunction from a U.S. trade court that could ban the sales of a broad range of HTC's Android smartphones.  HTC has a bit of time to ponder its fate; that ban is not set to take effect until April 2014.

If the Bloomberg report is true and HTC refuses to switch, its only real option will be to switch the internals circuitry of its devices; however, in that regard there's no clear route to escaping a ban.

If HTC doesn't switch to WinPhone in may be forced to redesign its smartphones to use Broadcom discrete modem chips to avoid a product ban by Nokia. [Image Source: oskay/Flickr]

The infringing components are found in Qualcomm Inc.'s (QCOMSnapdragon chips, which contain on-die modems that implement features that appear to be described by Nokia patents -- most of which were filed in 1999.  HTC could switch to NVIDIA Corp. (NVDA) and use a discrete modem from Broadcom Corp. (BRCM) or another chipmaker, but that could hurt battery life in its Android smartphones.  And given that the upcoming NVIDIA Tegra 4i chip will feature an integrated modem, that approach may quickly dry up as well.

One other alternative in the long term is Intel Corp. (INTC), however its 22 nm LTE-compatible Atom smartphone chips, which recently started shipping to OEMs at volume, but have yet to make it to a consumer product.

III. HTC Chairwoman: "Our Communication Does Have a Problem"

Even if HTC can resolve its platform and intellectual property uncertainty, it still faces trouble as financials continue to be in the doldrums.  In an interview with Bloomberg (the same source that reported the alleged Microsoft demands), HTC chairwoman and founder Cher Wang bemoans the Q3 2013 miss commenting, "We really have the best technology and the best product."
HTC BlinkFeed
The HTC One
She says that her company must "communicate better" with customers, remarking, "Our communication does have a problem but we are improving on that.  It’s a gap between our new products coming out and we are improving our innovation and our marketing."

Much of HTC's hopes to improve its marketing and brand image revolve around Robert Downey Jr., who is serving as the pitchman for HTC in new commercials.  The deal with Mr. Downey lasts for two years and is reportedly worth $12M USD; however, early commercials have seemed a bit confused if humorous.  But Ms. Wang firmly believes that Mr. Downey will deliver, stating, "People like him because people see him as a change maker.  I believe HTC is here to change."

The commercials so far all sample this longer commercial spot:

Ms. Wang comments that Q4 2013 will be HTC's "biggest challenge" yet, as it tries to reverse losses.  HTC released a comment "clarifying" this remarking, writing:

In a Bloomberg TV interview today, Cher Wang, the chairman of HTC, was not referring to the company facing financial challenges this quarter. Instead, she was referring to living up to the challenge of innovative marketing in Q4 of 2013. She puts direct communications with consumer at the center of its overall business strategy.

The best product and cutting-edge technology are still the most valuable assets to the company. Our biggest need in the forthcoming quarters will be embarking on alternative marketing thinking. HTC is in a time of change, taking necessary innovative steps on marketing to create a resurgence of the HTC brand.

The fiscal struggles have led some to believe that a sale or merger -- perhaps to a Chinese OEM -- would be the best route for HTC.  Indeed, after BlackBerry, Ltd. (TSE:BBposted its own first loss (which to be fair/clear was much larger -- nearly $1B USD) it announced a sale which is currently being finalized.  However, Ms. Wang is actively blocking any purchase of HTC.

Ms. Wang -- the daughter of billionaire former chairman of Formosa Plastics Corp. (TPE:1301), Wang Yung-ching -- currently owns an estimated 20 percent of HTC.  Ms. Wang has been cited at the richest woman in Taiwan.

Sources: Bloomberg, HTC, Reuters, Taipei Times

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By techxx on 10/8/2013 2:19:07 PM , Rating: 5
It's a shame the HTC One isn't getting the recognition it deserves, because I believe it is a superior phone to the S4 in several ways. Higher quality build, better speakers, Sense 5 actually impressive and IMO better than TouchWiz, better display, better dimensions/hand comfort, snappier interface despite slightly slower CPU clock, etc.

RE: Shame
By damianrobertjones on 10/8/2013 2:36:26 PM , Rating: 2
Imagine what the HTC one hardware would be like with WP8... fast, damn fast, plus smooth as silk

RE: Shame
By techxx on 10/8/2013 3:07:28 PM , Rating: 2
WP8 is that much faster than Android? I don't think I could give up Android for WP8... for now.

RE: Shame
By ClownPuncher on 10/8/2013 4:09:59 PM , Rating: 2
It is a bit snappier. It also has a better UI.

RE: Shame
By StormyKnight on 10/9/2013 12:37:25 AM , Rating: 2
Matter of opinion not necessarily shared by everyone.

RE: Shame
By ClownPuncher on 10/9/2013 11:01:21 AM , Rating: 2
Sure, but most opinions are going to be colored by social trends rather than hard data. Right now it is very hip to hate Microsoft. People hate Windows 8 because it feels like a mobile GUI, but when it's on a mobile device they hate it because, why not?

Phones are social status symbols. You either have a popular phone, or your opinion is invalid.

RE: Shame
By Jeffk464 on 10/9/2013 4:04:29 PM , Rating: 2
no, win 8 makes sense for a tablet its just a fish out of water on the desktop.

RE: Shame
By menting on 10/8/2013 4:36:47 PM , Rating: 2
WP is a better (in terms of speed) OS than Android imo, even though I use Android.
The only thing that WP has against it is the lack of apps

RE: Shame
By StevoLincolnite on 10/8/2013 6:15:35 PM , Rating: 3
The lack of Apps isn't really a big problem, well. For me anyway.
I've only wanted two Windows Phone 8 apps, one being for my small bank and one for my local radio station.

The rest is essentially already there. :)
For the banking I just linked a live tile to my bank account.

RE: Shame
By GulWestfale on 10/8/13, Rating: 0
RE: Shame
By Jeffk464 on 10/9/2013 4:07:40 PM , Rating: 2
yup, apps is the problem for sure. I'm going to windows phone but keep running into problems with a lack of apps. The biggest one being no Nest app. But I want google drive, google docs, and gmail.

RE: Shame
By Jeffk464 on 10/9/2013 4:02:57 PM , Rating: 1
WP8 is that much faster than Android? I don't think I could give up Android for WP8... for now.

I'm going to be going unhappily from android to a nokia 521 windows phone because its the best deal out there. But I'm going kicking and screaming.

RE: Shame
By Reclaimer77 on 10/10/2013 2:02:04 AM , Rating: 1
WP8 is that much faster than Android?

Not even close.

As usual whenever this same small subset of people speak about Android, it's always Android from yesteryear, not today's.

It's now been confirmed that Windows Phone has input latency times right there with Android. But these guys will swear up and down it's "snappier" and more responsive.

Just FUD.

RE: Shame
By nafhan on 10/8/2013 3:25:51 PM , Rating: 2
I imagine it would be pretty similar, but with less apps, and a less familiar/configurable interface...

RE: Shame
By Lonyo on 10/8/2013 3:43:43 PM , Rating: 2
There's this thing called the internet.
It has millions of websites.

So, you have a BBC Sport app? And a BBC news app?
I have a BBC website.

You have an FT/WashPo/NYT/Guardian app? I have a web browser.

Apps are dumb, and fewer apps SHOULD be a good thing, because 99% of apps are either stupid fart crap, or just reskinned websites. F that.

And I have an Android phone.

RE: Shame
By nafhan on 10/8/2013 4:09:30 PM , Rating: 2
My point was that the difference is going to be minimal... I think your statements mostly reinforce that.

I also agree that if an app is simply displaying static text in a browser frame, there's no reason for the app to exist. Some things (games, anything needing hardware access) do have to be apps, though. That said, plenty of apps that fall into the latter category are very useful or entertaining.

I'm also a current Android user, but from what I've seen I'd be satisfied with a high end iOS or WP8 device.

RE: Shame
By inighthawki on 10/8/2013 4:17:57 PM , Rating: 2
I can see his confusion, because my interpretation of what you said made it sound like you were simply implying that app quantity and not being familiar or down-to-the-metal customizable would significantly degrade the experience.

To be completely honest, I think 99% of users likely wouldn't care what kind of phone OS it had. Apple and Android are kind of the "hip new things" to get, but I bet most people could buy a nexus 4 with Windows Phone 8 on it and never even realize.

RE: Shame
By nafhan on 10/8/2013 6:01:50 PM , Rating: 2
I think 99% of users likely wouldn't care what kind of phone OS it had.
I think this is absolutely true of first time smartphone users. Despite my personal preferences, I do believe all the major phone OS's are pretty decent these days.

Switching, though, that is still painful - especially for people currently in Apple's ecosystem. With Google (and to a lesser degree MS), you can somewhat easily move between device types.

RE: Shame
By CaedenV on 10/9/2013 10:17:36 AM , Rating: 2
Could not agree more. Some things need to be apps, such as utilities (flashlight, weather), games, and productivity software (office, evernote) I have yet to find an app worth using.
It is not that the app can't be useful... merely that they are not useful. It is almost always easier to just go to the website and use that rather than a local app, especially now that there are more mobile sensitive websites available.

RE: Shame
By Nutzo on 10/8/2013 4:42:42 PM , Rating: 3
And it's also worse than the S3/S4 in a couple ways.

No SD card slot, and no user swapable battery.

That type of closed design might work for the iBot crowd, but not for many Android users.

Maybe some day, when phones come stock with at least 64GB (without charging an extra $100+), the SD slot won't matter. And maybe when batteries last 3-4 days under normal use, a swappable battery won't matter either.

RE: Shame
By superflex on 10/8/2013 5:54:43 PM , Rating: 1
Maybe if Samsung would start their phones with 32Gb of storage, you might not feel the need for a SD card.
I havent even come close to approaching half the capacity of my One.

RE: Shame
By Lonyo on 10/8/2013 6:55:20 PM , Rating: 3
I have a 64GB MicroSD card in my S3, because I also use it as my primary music player.
32GB wouldn't be particularly useful for music + non-music things, such as the occasional video.

RE: Shame
By Solandri on 10/9/2013 3:13:57 AM , Rating: 2
It's really simple.

If you build a phone which doesn't take microSD cards, only people who don't care about microSD cards will buy it.

If you build a phone which takes microSD cards, people who don't care about microSD cards will buy it, and people who do care about microSD cards will buy it.

When you leave out a feature, you are making a decision to reduce your market share. Obviously, someone somewhere at HTC decided that the reduced market share was a worthwhile tradeoff or whatever reason. And obviously he turned out to be wrong.

(Incidentally, I'm one of those people who would've gotten an HTC One if it had had a microSD card. And like the poster above my 64 GB microSD card is also nearly full.)

RE: Shame
By rocman on 10/8/2013 4:51:53 PM , Rating: 2
Agreed. Putting aside the philosophical differences in software, I've always had respect for apple's hardware in the iphone. The HTC One is honestly the first android phone that I can truly say matches or exceeds the iPhone in pure hardware design.

Anyone finds MS/Nokia a little sketch with their going after HTC on what looks like a Qualcomm infringement? By this logic, why isn't MS/Nokia going after Samsung as well, who obviously ships more devices using the SAME Qualcomm chip with integrated modem?? I've always pulled for the underdog, especially when it's putting out good stuff. At this rate, Samsung is going to become this huge monstrosity. We don't need more plasticky Touch-wiz devices.

RE: Shame
By Philippine Mango on 10/9/2013 2:22:45 AM , Rating: 2
no replaceable battery, no external memory is a deal killer.

RE: Shame
By TakinYourPoints on 10/9/2013 6:25:49 AM , Rating: 2
Yup, it is the best high end Android smartphone out there. HTC is doing a good job, but not good enough against the marketing and distribution juggernaut that is Samsung.

RE: Shame
By Jeffk464 on 10/9/2013 4:01:15 PM , Rating: 2
sense 5 blah, give me a nexus device with no junk

"Eyes Windows Phone Escape Route"? Nope.
By nafhan on 10/8/2013 3:51:01 PM , Rating: 2
HTC sold almost as many Android phones as WP's sold - total, from any manufacturer. HTC exiting the Android OS business and going solely WP would probably cede market share to other Android OEM's, and that's about it.

By vcfan on 10/9/2013 1:10:53 PM , Rating: 2
no,that is false. nokia has sold more windows phones than htc has for the last 3 quarters(this quarter included). last quarter nokia sold 7.4 million windows phones alone. total windows phone sales were 9.1 million. this quarter is going to be even bigger.

Moving to WP8
By CaedenV on 10/9/2013 10:59:00 AM , Rating: 3
I love WP8. It is fast, responsive, gets 2-3 updates a year, and has very few bugs. It is a legitimate complaint that it is an immature platform lacking some key features (GDR3 is FINALLY bringing the ability to attach something other than a photo to an email!), and there is not a huge selection of apps yet, but they are remedying both of those problems pretty quickly.

Anywho, when it came time to buy my phone last December the options were the Lumia 920 vs the HTC 8X. The 8X is a nice device, but the Lumia had better audio, better video, better native apps, and due to their track reccord there was more of a guarentee of support after the launch of the product. Plus the 920 feels solid, and considering how often I have dropped the poor thing it very much is as solid as the impression it gives. By comparison the 8X feels and looks like a toy. I appreciate the addition of color in a lot of modern smartphones, but if I want color then I will get a case with some color.

Now the HTC One on the other hand is a BEAUTIFUL device. I have a few friends with them, and I have to say that they are pretty awesome. The camera in my 920 is still better, but the camera on the One is more than good enough. However, until GDR3 comes out for WP8 there simply cannot be a WP version of the One. Again, it is the issue of WP being an immature platform, and all of the major updates that have come out this year have been to support more hardware features, and better hardware. GDR3 finally brings 1080p screen support, as well as quad core CPU support, so the devices coming out this winter and next year should finally catch up with the specs of Android devices.

But the thing is, I am on contract for another year with my 920, so I am not exactly a potential customer. In fact, for the most part everyone who WANTS a high end windows phone is already on windows phone with a 920, 928, 922, or 1020. The market share being eaten up by windows phone is not on the high end because we are all on contract. If they want to be sucessfull on WP then they have to compete with the $80 (sometimes on sale for $50) no-contract Lumia 520... and I am not sure if they can stomach the slim profit margins to be found on such a dirt cheap device. I am sure that a HTC One with WP would sell a few units, because it would be a very compelling device, but I highly dobut it would sell enough to help HTC's situation at the moment.

All that said, if HTC has a similar beautiful phone available in Dec of 2014 that can keep up with the other devices available then I will be all ears. I love Nokia, but the idea of buying a Microsoft Lumia device does not exactly have the same appeal, so I will be looking to jump ship to an alternative at that point if there is one to jump to.

Getting what they deserve....
By petrosy on 10/8/2013 6:33:09 PM , Rating: 2
After locking down some of their devices tighter than a duck's butt, making it a real chore to root and hardly ever updating their SW. What do they expect.... the minority of people that love hacking and modifying their devices are the ones that recommend devices to their friends. So you burn that community, you also burn the greater community.
Regardless what people think of Samsung they got that part right and are reaping the benefits...... even though they seem to be going backwards in that department lately.

I am in the market for a new phone and am seriously considering the HTC One but my previous experiences leave me reluctant.

Robert Downey Jr.???
By Doh! on 10/8/2013 8:00:54 PM , Rating: 2
The company loses $100 million in a quarter and you pay $12 million to a hollywood actor in hopes of boosting sales? Wonder why the company is in such a deep sh*t.

HTC still does not get it
By rocketbuddha on 10/9/2013 11:05:05 AM , Rating: 2
In Pocketnow on a article titled "What HTC did Right..."
I gave a contra-opinion 6 months ago.

Looks like HTC still has not got it with the interview from Cher Wang that was linked. It is still thinking there is a "Communication Gap" or "Marketing Gap". Jeez!

By ResStellarum on 10/9/2013 9:14:23 PM , Rating: 2
Am I reading this right? Microsoft is threatening HTC with a product ban if it doesn't switch to / go Windows Phone exclusive? That sounds a hell of a lot like antitrust / patent abuse to me.

I mean Microsoft are already extorting HTC with their dubious patents already, and we all know Nokia is in their back pocket. It looks suspiciously like a 1-2 punch. Underhanded if you ask me.

SD expansion means little
By blzd on 10/9/2013 9:44:17 PM , Rating: 2
Ever since Google decided not to let apps or games be installed on the SD card, internal memory is what matters to most people I would imagine.

Those who need SD cards mainly just want to use their phone like an old 60GB iPod and anyone with lots of data has alternative options.

Just get rid of phones with less than 16GB internal. I would've picked up an LG L9 on the cheap but it's 4GB Internal (2GB free) has been made it basically unusable.

By BifurcatedBoat on 10/29/2013 7:53:06 PM , Rating: 2
For me, it has to be an Android phone with a big battery. I don't want a phone that goes dead on me in the afternoon or evening, and I have no interest in Windows Phone. I'd like to distance myself from MS as much as possible.

By Flunk on 10/8/2013 1:56:43 PM , Rating: 1
Mr. Downey Jr.

Do I need to explain what's wrong with this?

Be more open..
By piroroadkill on 10/8/2013 3:29:37 PM , Rating: 1
Be more like Sony (I can't believe I'm saying this)... they have great phones in the midrange like Xperia SP, cheaper and better spec than HTC One Mini, nifty features like the colour bar for notifications.

Hey, here's another idea. Another phone with a full goddamn keyboard.

Here's another idea on top of that: a slider with OLED keys.

A customisable keyboard slider phone? Jesus Christ, there are people on the internet would lose their shit over that.

You already have the basics in place for these things, HTC Touch Pro 2 had a great design, although obviously it's a bit chunky for today, and the screen a little small, but the building blocks are all there.

Cut down your lineup to simple, distinct categories, do them well, and fit niches that nobody else is doing.

Even if this fails, you'll be fondly remembered. However, recently, you've burnt all your bridges built early on with Android devices by: removing microSD from high end phones, pulling Android updates for older phones, even when you promised they would be available, cutting features from Sense.. etc, etc..

I have a soft spot for HTC, and they've clearly been there for a very long time making devices for other corporations, they have knowledge, tooling and skill, but they need to stop following the pack so much..

FACT Check
By sprockkets on 10/8/13, Rating: -1
RE: FACT Check
By Philippine Mango on 10/9/2013 2:25:11 AM , Rating: 2
Well if they want HTC to supply Windows and Android phones, that's fine with me but I'd be pissed if they forced them to be exclusively with Microsoft because that feels wrong.

RE: FACT Check
By sprockkets on 10/10/2013 3:59:50 PM , Rating: 1
Wow got a -1 for posting facts huh?

Too bad losers, cause NOKIA banned HTC phones, not Microsoft. SUCK IT ARMCHAIR VOTERS!

Windows Phone
By Argon18 on 10/8/13, Rating: -1
RE: Windows Phone
By DukeN on 10/8/2013 2:18:18 PM , Rating: 2
Thorsten Heims just came at the thought...

RE: Windows Phone
By damianrobertjones on 10/8/2013 2:35:30 PM , Rating: 2
Microsoft is like the wise, patient, waiting guy when it's closing time at the bar, staying there to see if it can grab a struggling client. Sure, HTC and MS did business before, good business, a lot of business, but HTC decided to go with the first hack offering CHEAP prices.

Now, of course, HTC is struggling and as MS smiles a bigger, ever bigger smile as the seconds pass, HTC is getting desperate and just might go for an attractive deal. lol (I didn't actually lol).

SOme people see things differently... .

RE: Windows Phone
By retrospooty on 10/8/2013 3:32:40 PM , Rating: 2
"SOme people see things differently..."

And you seem to see everything MS's way, in all cases no matter the issue. You arent seeing things "differently" you are seeing what MS needs you to see. You "tow the company line" WAY too much for anyone to take you seriously.

RE: Windows Phone
By datdamonfoo on 10/8/2013 2:35:51 PM , Rating: 2
A more apt comparison would be Daenerys Targaryen. Once royalty, now excised from perhaps its rightful place as King/Queen, Microsoft is now freeing those enslaved by Android and Apple and building a huge army in order to return to power. With the help of its three dragons, Xbox, Windows, and Office, it will hopefully lay waste to pompous, rich Lannisters (Apple) and the scrappy but clumsy Starks (Android).

RE: Windows Phone
By arazok on 10/8/2013 3:27:59 PM , Rating: 2
Your like a broken record. Constantly spewing the same crap about MS, regardless of the facts.

RE: Windows Phone
By inperfectdarkness on 10/9/2013 3:34:21 AM , Rating: 1
FYI, Sanyo doesn't have a mobile-phone division any longer. It sold that to Kyocera years ago. Sad thing is, Sanyo phones actually got rave reviews and numerous awards over the years. The Katana was a favorite of mine for quite a while.

Another Smartphone Manufacturer Doesn't Get It
By hrrmph on 10/8/13, Rating: -1
By flyingpants1 on 10/8/2013 4:13:12 PM , Rating: 4
I think the HTC Butterfly S is the closest thing to the perfect phone at the moment.

Bright LCD, so you can see the phone.
Front speakers, so you can hear the phone.
3200mah battery, so you can use the phone.
Low-light camera, so you can take pictures with the phone.
MicroSD card, so you can store stuff on the phone.

They pretty much maxed out every specification.. The S4 has an inferior screen, speaker, camera, and battery.. Too bad there is no US release.

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