HTC continues to quietly sink; insiders blame its chief executive

HTC continues to quietly sink; insiders blame its chief executive

Summary: The ailing phone maker doesn't need a new advertising strategy, or a new flagship device, say insiders. It needs a new chief executive. Even then, there's no obvious successor.

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TOPICS: HTC
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(Image: CNET/CBS Interactive)

HTC is slipping into the financial abyss, and has been for some time.

The company has seen a 70 percent fall in net profit during its 2012 first quarter. Meanwhile, its revenue has fallen by shy of 35 percent compared to the same period a year ago, with the company still reeling from a painful January where revenues fell by almost 50 percent. And no let-up said it was facing gross margin challenges due to the high cost structure of its flagship smartphone HTC One.

You get the picture.

According to Reuters' latest, it may not be the company's devices, or strategy, or even its advertising campaigns to blame, so say current and former executives, who are firmly pointing the finger of blame at chief executive Peter Chou, a man who has been leading the company for ten years.

Just one example of Chou's leadership and decision making was described in a so-called "shoot-from-the-hip" anecdote. The piece described how the HTC team realized it needed another device for its portfolio. Chou sketched a few designs on a whiteboard, but also included a price point, and a launch date — which was just three months away.

This did not take into account enough time for manufacturers to build the device, let alone garner media reviews often used to propel devices into the mainstream market.

"Having the ability to just tear up a plan and say, OK, this is the new thing and we're going to get it done fast," said a former senior foreign executive speaking to Reuters. "That's Peter."

But he also "openly berated managers" and "overrode their decisions," often with little discourse, according to insiders.

Many executives have left HTC and moved onto different industries or stronger companies. The company's chief operating officer stepped down in June, just weeks after the company reported a 98 percent drop in its net income. HTC's digital marketing director John Starkweather and global retail marketing manager Rebecca Rowland also left just weeks before. 

While HTC was once third in the smartphone rankings, the company faced increased pressure from other Android device makers, notably Samsung, which develops and builds its own chips and components in-house. 

And while the company quietly sinks, Chou will likely go down with the ship before he leaves the company, according to executives, which is only compounded by the fact that there is no obvious successor.

Topic: HTC

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  • Paralell universe

    They should fire that Google Trojan and start building HTC One's running Windows Phone 8. They're killing their company being 'Android' only. They're abandoning their only hope by not going with Windows Phone anymore.

    LOL
    Dreyer Smit
    • They aren't "Android Only"

      They make a couple of Windows Phones, too.
      William Farrel
      • Well those for the name sake

        HTC become a major ODM due to Windows Mobile and they should be thankful to Microsoft, then Compaq (now HP) and later many OEMs like Seimens, Audiovox etc. who were getting their WinMo devices built by HTC. When OHA was formed, HTC was the first to jump into Google Mantra ditching Microsoft and its partners and thus pissing its then clientele. No doubt they've enjoyed the success when they boarded OHA leaving WinMo slowly being the first, but that didn't last. They lost to Moto, when Big Red introduced Droid line, who got ding from Apple, i.e., without iPhone at that time, later to Samsung when AT&T and T-Mo started introducing Android line more and more. Only Sprint introduced good number of HTC phones, and of course Sprint was already losing race. It is their management that shoot their own foot. They have none to blame.
        Ram U
        • @ Ram U

          Interesting writeup.

          It is true that HTC defected to OHA from WinMo but they did it actually because of Google's service pressure. If Google was not at the top of their search game back in 2007/2008, then HTC will have woken upto the fact that OHA is not necessary and that one can be like Amazon to fork Android (which Alibaba did too).

          HTC's blunder was not in choosing either Android or WinPhone. Their blunder was in not realizing that the smartphone market is a hardware device priority market and not a OS/software platform priority market. Simply put, software is secondary and hardware is primary in a smartphone. And we only have Samsung and Apple to prove it.

          There were only three phone OEMs that succeeded in the 2nd generation mobile device market from 2001 till 2010. And those Motorola, Nokia and Ericsson (to a lesser extent). Kyocera, LG and Samsung were the lowerend phone makers back then. Even Nortel, Fujitsu and Alcatel (and Sony to an extent) dropped out of those markets and ultimately their mobile divisions folded by 2005 or 2006.

          What we are witnessing is the consolidation of the 3rd generation mobile device market. And a lot of higher end Android OEMs including HTC, Motorola, Sony, Asus, Acer (tablet side) etc will not survive the implosion since there is no place for them in this NFL lineup.

          I think this has nothing to do with Android versus Windows Phone. But I do think Microsoft is smart in not diluting the WindowsPhone brand by expanding marketshare too fast and too much. Time is on the side of people who have saved money and are ready to invest when ready. That time is not now. Sorry HTC.
          calahan
        • Re: they should be thankful to Microsoft

          No, Microsoft should be thankful to HTC for making a silk purse out of the Windows Mobile sow's ear.

          http://en.m.wikipedia.org/wiki/TouchFLO

          Android was a breath of fresh air by comparison.
          ldo17
    • Funny paralell, but there is an idea in there that might help.

      HTC is a good example that just throwing Android on great hardware isn't a recipe for success. It is becoming increasingly difficult to stand out from the overcrowded Android market unless you are Samsung and HTC is drowning as a result of it.

      The funny thing is that they might create a way to stand out by parallel development. Take the HTC One for example. It may be HTC's flagship, but to most consumers it is just another Android phone on the store shelves. Even though it is arguably the best Android phone available it just can't compete with the marketing and hype of the Galaxy S4.

      Had HTC put both Android and WindowsPhone8 on the same hardware and marketed both at the same time that could have drawn a lot of attention to their devices. The same for the HTC 8X. They should have made an Android version of that phone at the same time as well.

      If someone walks into a mobile store the likely results would be the following.
      1-Customer askes for an Android phone they will be shown the Samsungs line.
      2-Customer asks for a Windows phone they will be shown the Nokia line.
      3-Customer asks for an iPhone they will be shown the Apple line.

      If HTC did a line of Android and Windows phones on the same hardware they could stand a reasonable chance to be shown to customers in the first two scenarios. It would give a salesperson something to offer a customer, a reason to showcase the phones to someone.
      Emacho
      • re: HTC One

        "the best Android phone".........please. That is ridiculous. A good phone, sure. If this was such a good phone I don't see anyone not buying it. Samsung S4 is a great phone and people buy it because it is.

        DCM
        dcmille290
        • Marketing

          The S4 is a great phone but also totally gets big sales from very strong marketing. If you go strictly on phones sold as you have stated, that is saying that the Apple iPhone is a far superior phone to the Galaxy S4 based on your sales logic. Marketing and margins mean everything in this market. The HTC One fails in both of those categories. The S4 is a phone loaded with tons of gimmick features that are WOW type eye openers but really are useless in the long term. The HTC One is a better piece of hardware, no question.
          Brian Pex
        • ***Arguably*** is the key word you ignored.

          "arguably the best Android phone available "

          That is what I said and you are proving it true. People could debate all day between the Galaxy S4 and the HTC One over which is best and it would be hard to pick a clear winner. Both are exceptional phones.

          Don't quote out of context and then criticize based on that.
          Emacho
      • Good Points

        I have to agree with all that you said. Android is a fragmented and confusing market to people on the fringe of buying a smart phone. Apple and Samsung have proven that marketing is everything. The HTC One is a great device but they just don't have the clout that Samsung has. It is a shame. They make a great device. Samsung makes their own chips which is a huge plus. Apple makes designs their stuff and has a fully integrated system with end to end control. HTC has neither of these things...
        Brian Pex
    • their win8 phones are selling worse

      Their best selling phone is by far the HTC one... I actually know a heap of people that have them here in australia so the must be selling tons of them.

      I've yet to see a HTC win8 device around here despite HTC making several. I doubt making more is going to sell them. The HTC one is the first decent phone they have made in ages... and a step in the right direction. I've yet to hear anyone who has used one significantly have a bad thing to say about them. If I wasn't hanging on for a Note3, I'd have a HTC one myself now.
      frankieh
      • Yes, HTC is largely an Android phone maker

        They dabbled a bit in Windows phones, but Windows phones do not sell anywhere near as good as Android does. Too bad for HTC neither do their Android phones.

        It doesn't matter which Android model is their best selling model or how great it is, because overall HTC failing.

        Samung currently makes 95% of the profits in Android devices. That leaves HTC fighting for the scraps of 5% with everyone else. If HTC wants to rebound they need to do something to stand out from the crowd.
        Emacho
  • Could Be Worse--Could Be Nokia

    At least they haven't been losing money for the last two years.
    ldo17
    • Who has a better outlook right now?

      Nokia.
      kstap
  • HTC got reckless

    Lost resources in windows phones that were basically irrelevant, releasing devices that were behind competition.
    They woke up with the one, but from reports it seems a very expensive phone to build, hurting profits.
    AleMartin
    • @AleMartin

      Lost resources in Windows Phone? HTC used a little resource for Windows Phone. Lots in Android.
      spicycheeks
      • There are good big investments

        ... and bad small ones.
        Wasting money is not a good policy for companies - even if it's just $1
        AleMartin
        • Who says they lost money on windows phones?

          For all you know it might be their most profitable line of devices.

          What we do know is that
          HTC is largely an Android phone maker.
          HTC is dying.
          HTC isn't dying because they made a small investment into something.

          If anything HTC is going to die, because it made too large of an investment in Android.
          Emacho
          • Re: Who says they lost money on windows phones?

            The fact that they seem almost ashamed of them is a bit of a giveaway.
            ldo17
          • Thank you for that financial report

            and your stunning conclusion based on measuring shame.

            /s

            HTC lives or dies by their Android phones and currently they are dying. You are always talking about the riches device makers are harnessing from Android, so how do you explain this?
            Emacho