The Death of HTC in Seven Bullet Points, Revisited


HTC Corp., Taiwan’s largest smartphone maker, posted its lowest quarterly profit on record after the delay of its newest flagship phone caused revenue to miss the company’s target.
First-quarter net income plunged 98 percent to NT$85 million ($2.8 million), the sixth straight decline, according to data released by the Taoyuan, Taiwan-based company yesterday. The average of 19 analysts’ estimates compiled by Bloomberg was for profit of NT$600 million.

HTC lost early momentum for its HTC One handset in February as a shortage of camera components forced it to delay shipments in key markets by as much as a month. Prospects for revenue to rebound this quarter may be limited as the new device becomes widely available less than a month before Samsung Electronics Co.’s new Galaxy S4, which goes on sale in the U.S. on April 26.

It looks like we’ve arrived at bullet number seven:

This is what a death spiral looks like:

  • HTC is a smartphone-only vendor with limited capital reserves
  • HTC foolishly wastes cash on acquisitions, including VIA and Beats, and pisses off the carriers to boot by allowing their phones to be unlocked
  • HTC underinvests in marketing, including above-the-line (advertising), commissions, etc.
  • Samsung does the opposite, plus a whole lot of other interesting stuff (lots more about this soon)
  • HTC sells relatively few phones compared to Apple and Samsung, resulting in less cash for marketing
  • Less cash for marketing means fewer phones sold; fewer phones sold means less buying power in the component markets
  • Less buying power for components means their “Savior” phone is late, which means they get less cash less cash

The One is finally arriving in stores, and it is, by all accounts, an amazing piece of hardware. Anandtech has one of the best, most comprehensive reviews I’ve ever read:

The HTC One is an incredibly ambitious phone. I can’t think of the last time I’ve been excited not just because I’m reviewing a triple-A handset, but rather because there are innovative new features inside and ambitious risks taken by the OEM. In the case of the One, there are a number of them — front facing stereo speakers, an all metal unibody construction with unique antenna design, display just short of 5.0-inches, and of course the 4.0 megapixel camera with OIS and comparatively huge 2.0 micron pixels. The result is a phone that’s not just exciting because it’s something new to review, but because it’s different and uniquely better for the right reasons…

I’ve never given any smartphone an editors choice award before, though I daily regret not giving the One S an award of some kind. For the HTC One I’m giving our Editors Choice Gold award, which is our second highest award. The One is an incredibly awesome device.

Unfortunately, it’s not going to matter. As Benedict Evans succinctly put it in the Guardian:

Making lovely bits of hardware is a necessary, but insufficient, condition in this business.

I desperately hope HTC pulls through; I have a very soft spot in my heart for them from having lived in Taiwan. But while product garners the headlines, it’s only one piece of the mobile puzzle.