HTC: Is it 'Quietly Irrelevant'?

Summary:HTC's outlook indicates that it's stuck between Samsung and Apple without a lot of wiggle room.

HTC's tagline is quietly brilliant. The smartphone maker's second quarter results and third quarter outlook indicate that the company may become quietly irrelevant.

The company's second quarter results (CNET, Techmeme) missed estimates with a net profit of NT$7.4 billion on revenue of $91.04 billion. But the outlook for the third quarter was more worrisome. HTC projected third quarter revenue of NT$70 billion to $NT80 billion.

In other words, HTC launched a series of new products in the second quarter---HTC One, Desire, EVO 4G LTE (review) and Droid Incredible 4G LTE (review) and barely held the fort. HTC's outlook indicates that those new devices are aging rapidly.

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Barclays Capital analyst Dale Gai said that HTC could be "quietly irrelevant" if it doesn't get its act together. Meanwhile, HTC offered little direction on strategy or plans to cut costs. Gai said that HTC may lose cloud with carriers over subsidies and mostly compete on price.

The issue for HTC is that it just can't compete with Samsung on scale or marketing. Like Nokia and RIM, HTC is looking at being collateral damage as Samsung and Apple form a smartphone duopoly. As Knowledge@Wharton noted, the smartphone industry is due for a shakeout.

Macquarie analyst Daniel Chang handicapped HTC's outlook and earnings on Friday:

As we pointed out, Apple and Samsung will have a combined market share over 70% in 4Q12 if our and the street’s forecasts of iPhone shipments (60m units) and Samsung sales (60m+) are correct. This implies HTC may face a larger drop in shipments in 4Q12 since HTC’s target market overlaps in various regions with these two giants.

HTC's master plan is to grow its share of China, increase marketing and sales efforts in Europe and North America and continue a push into Asia's various markets.

Simply put, HTC's playbook will look more of the same. HTC has plenty of cash, but so it won't disappear. Instead, HTC could be on the path toward being another irrelevant smartphone maker without a dramatic move.

Topics: Mobility, Smartphones

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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