HTC: It can and will get worse

Summary:HTC is betting on a slew of devices to save the day in February and March at the Mobile World Congress, but don't bet on a quick fix.

HTC reported dismal fourth quarter sales and the first quarter is probably looking worse. HTC is betting on a slew of devices to save the day in February and March at the Mobile World Congress, but don't bet on a quick fix.

The smartphone maker---once a darling---reported preliminary fourth quarter sales of NT$101.4 billion, down 25 percent from the fourth quarter and 2 percent year over year. Profits were also disappointing.

Now what? HTC is getting creamed by Samsung, which is also riding the Android wave with better success. Analysts are now expecting Samsung to continue to thump HTC. In fact, the first quarter may be worse than the fourth, according to Macquarie analyst Daniel Chang.

Related: HTC's statement | HTC posts poor Q4 results: Loses Android mojo to Samsung, Apple | Samsung expects record profits: Patent wars barely dented sales | Techmeme | Smartphone shake-out looms as hardware herd may thin

In many respects, HTC finds itself in a rut that plagues all hardware companies. If you miss a product cycle you're doomed. HTC needs thinner devices with better battery life. The problem is those devices will arrive just as thinner and lighter will be the norm. HTC's alleged Facebook phone will arrive right around the time Apple launches an iPhone 5.

If this script sounds familiar it's because RIM and Nokia face the same problem. Chang said in a research note:

We believe HTC will launch several flagship models during MWC in Feb/March which focus on thin and lightweight form with longer battery life. We remain skeptical on the competitiveness and sell-through of these devices as we believe most smartphone players will launch similar devices for their high-end line, especially we have not seen much hardware upgrade which HTC could benefit from their R&D strength. For 2H12, Facebook phone which is coming out during summer could have more potential given high subsidies, but we continue to flag that iPhone 5 launch in June/July with new design and upgrade spec (LTE) will be a bigger threat to high-end focused player such as HTC.

It's possible that HTC's new phones near the second quarter matter, but keep in mind that it is already behind the Samsung Galaxy line and the Motorola Droid Razr in the thin and light department.

KGI analyst Richard Ko said that HTC's prognosis won't look better until it gets more competitive products. "We think HTC’s product line up will remain in a weaker position than that of global peers until it launches its new flagship products during the MWC. We estimate HTC to ship 51.3mn units in 2012, up 14% YoY, far lower than estimated industry growth of 30-40%," he said.

Topics: Mobility, Hardware, HTC, 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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