HTC's quarterly profits plunge again, what can they do to turn things around?

HTC's quarterly profits plunge again, what can they do to turn things around?

Summary: HTC makes fantastic hardware, often better than Samsung and Apple, yet they can't seem to get that one device across all carriers or attract the consumer enough to compete with Samung in the Android market. With another quarter of falling profits, what can HTC do to regain the momentum they had with the G1?

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HTC's quarterly profits plunge again, what can they do to turn things around?

I was a bit depressed on the train this morning after reading about HTC's 2nd quarter financial report where profits plunged nearly 60 percent from the same quarter in 2011. I have always found HTC's hardware to be better than Samsung's products, including the current HTC One X when compared to the Samsung Galaxy S III. However, Samsung is apparently the darling of the carrier so without a launch on all major carriers HTC doesn't have much of a chance to compete for the top Android spot.

We have seen HTC's disappointing financial results since last fall and the hope was that the new HTC One line would show they are focused and working to regain market share. While the One S and One X are fantastic products, there is no One phone across carriers to carry the HTC flag and a consistent message. While the current quarterly report shows more falling profits, last quarter showed a 70 percent fall too, the good news is that revenue was still at $3.04 billion and HTC isn't going anywhere anytime soon.

HTC made the first Android phone, the T-Mobile G1, and helped generate excitement for the Android platform in 2008 as people looked for a competitor to the successful new iPhone. They have had successful Android products since 2008 for a few years there were too many devices with a shotgun strategy. Google has significantly improved the Android UI and I don't think consumers are seeing much benefit from HTC Sense, which is a key part of HTC devices. People are also much more savvy about their phones today and the lack of updates to new devices is starting to be known by people other than tech enthusiasts.

I haven't worked for a mobile phone company and am not sure what HTC should do to regain market share. I think the hardware is fantastic, but they really need to get carriers on board with a consistent message. Verizon doesn't even have an HTC One variant and that has to hurt HTC. Maybe Windows Phone 8 will help, but since past HTC Windows Phones appeared to simply be standard black slabs taken from their existing Android phone lineup with a new OS inside there has to be more done to innovate or at least tell the story to the public about their products. Many of the things people talk about in Samsung's latest GS III are gimmicky and likely never used beyond the first few days where people try to do what they see in commercials. However, it is generating conversations around their products and the GS III is a hit.

What do you think HTC should do to turn things around? Can they regain market share and compete with Samsung again?

Topics: Mobility, HTC, Smartphones

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24 comments
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  • HTC

    HTC was on the forefront with the 4G EVO phones, but since then, they are behind the times. Not sure, they will ever recapture their position.
    kentuckyloan
  • Differentiation ?

    I think in order to survive, some phone vendors are going to have to differentiate themselves somehow (and not necessarily with a UI that slows down updates).
    It seems that there are really too few Physical Qwerty keyboard phones being offered. Maybe someone needs to build/sell the phone on a hybrid (best of both worlds) ad campaign. The key also seems to be to not price the phones out of the reach of your target customers.
    jkohut
    • ...

      "The key also seems to be to not price the phones out of the reach of your target customers."

      This is economics 101. The fine balance between maximizing profit and keeping price points on target have always been a big focus.

      Honestly, the fact that Verizon doesn't have a HTC One product in their lineup probably is the biggest reason HTC continues to struggle. I'm not well informed on Verizon's and HTC's dealings, but does it not stand to reason that you would have your golden goose represented across all carriers? I'm not clear as to why HTC does not offer it's One line on Verizon.
      jhnnybgood
      • Having been in the industry forever.

        I can tell you that I am sure that they offered the HTC One to Verizon (maybe or maybe not the One X, but a variation of it) but Verizon didn't want a device that ATT had. Having exclusivity is VERY Important to the top 3 carriers.

        But you can say "What about the Galaxy S3?" I can also guarantee you that Samsung brought a Brinks truck full of $$$ to help drive S3 at VZ (and all carriers) and showed them a majestic marketing plan that VZ could not refuse.

        With VZ, they get the benefits of Apple/Samsung's marketing might and they put the smaller solid players (Motorola and HTC) into their own Droid franchise. While other companies such as LG, ZTE and Huawei is left in the cold.
        casualsuede
  • little chance for growth...

    Apple and Samsung are locking up the smartphone market fast. The rest of the players need to differentiate sensibly and curb unrealistic expectations. HTC's only chance of growth is WP8 and that would require premium devices for WP8 (not me-too devices ala WP7) and also WP8 to be promoted by Verizon in addition to TM and ATT like now. Sprint is a dead end having purchased from Apple 3 iPhones for each current account holder.

    HTC is too small to make carrier demands and "carrier exclusivity" doesn't allow one-phone-for-all-USA-carriers which would allow. Unlike Nokia (maps) it has no services.

    They would be smart to find a niche in quality WindowsRT tablets with built in 4G. Verizon/ATT share data plans open a huge opportunity to add a tablet device for only $10 more a month.

    Android tablets are futile and obviously they are locked of iOS.
    chinch987
  • throw away sense

    If they throw away sense, use pure google, and get updates to their phones within a month of the nexus phones, in addition to the nice design and hardware of the One line, I think that could go a long way to putting them back on top. Some people like sense, but do you know what people like better? updates that are actually on time.

    and bring back the SD card slot.
    theoilman
    • You assume that familiarity < updates

      Before the iPhone, phone OS updates were highly irregular. A few WinMo phones got them, but overall, phones shipped with what they shipped with.

      The majority of people will take "understood" interfaces over "new" ones. In fact, many people are confused with phone OS updates. There's no glory in confusing everyone. If you really want the latest, that's where the modding community comes in handy - if you can install ClockWorkMod Recovery, you're probably comfortable with a new UI. We're not talking vulnerability patches here, we're talking more serious revamps and users who likely don't know or care what version of Android their phone is running.

      Joey
      voyager529
      • updates are more important than they used to be

        Back when phones were just phones it didn't matter if they received OS updates. Modern phones are as complex as any other personal computer and they have access to all the sensitive information and financial accounts as the computers we have sitting at home. Considering how easy it is for bad guys to gain physical access to these portable computers everyone should be concerned about software updates. When Google has an Android patch or upgrade we have as much reason to expect it to improve security as we do with Windows updates and those Android updates should be distributed quickly.

        Committing to fast updates and actively fixing security risks could be a powerful selling position for HTC.
        bgbarcus
        • Not following...

          On the one hand, 'personal data' has been on phones in most of its present form for ages. Windows Mobile 5.0 devices could browse the internet and receive e-mail and texts containing passwords and financial data.

          On the other hand, very rarely are Android updates touting security fixes as opposed to new features. I'd buy your logic if security updates were separate from the visual presentation layers, and I'd bet that smaller security patches *would* be rolled out by carriers more readily if they weren't, in fact, much larger and more complicated than mere security patches.

          At the same time, I don't think "We roll out security patches fast!" is a great marketing stance to take, because the implication is "We sell insecure devices and patch them later!" ICS/JB looks and feels a LOT different than stock FroYo/GB, and for many that's a much larger problem than security. See, security of sensitive information on a portable device is REAL simple: don't put sensitive stuff on your phone or tablet. If you need it that bad, that's the risk you take.

          That said, I wouldn't be opposed to Google splitting security patches and OS upgrades and keeping everyone on target for OS patches that don't significantly change the way the phone works.


          Joey
          voyager529
      • the biggest complaint over android

        is lack of consistent updates. there is no subject that people complain about more. if people were really scared of updates as you say, I don't think this would be the case.
        theoilman
        • Who complains?

          A vocal minority complains. ZDNet article after ZDNet article cites version fragmentation as if it's the death of Android, when Android on the phone is like Windows on the desktop. Ed Bott isn't curled up on the floor, rocking back and forth over the fact that Windows desktops are likely running either XP, Vista, or 7, with some outliers running 2000, 98SE, 8, etc. Platform fragmentation happens. At present, most apps will run on any Android version north of 2.2; I'm unaware of any phone by any carrier released within the past two years that's running 2.1 or earlier.

          Joey
          voyager529
    • Don't throw away Sense

      I completely disagree with losing Sense. Sure it'll appease all the vocal minority of techy people that like to get involved with blogs and forums online but the average user wants a UI that's consistant.

      Whilst stock Android is finally getting it together on the OS side, many of the core apps still have their own idosyncrasies, colours schemes and together, well they're a still jumble.

      Sense is not just the UI but a suite of core apps that have the same professional look and feel and that are tightly integrated so that common info can be shared across apps. None of which would probably tempt a hardened techy but most phone owners are not bothered about 0 day updates, 0.5% performance boosts and being able to run 10 apps simultaneously. All they want something that's easy to learn and use.

      HTC are very good at design and manufacture but so are Samsung. The only significant advantage HTC has over them is their software department. It would be a very bad move to cut them out.

      However, a great deal of brand awareness is from bloggers and people who post on forums who tend to me the more technically aware or at least technically interested. It's these people that push brand awareness but their needs are often at odds with the average user.

      What HTC needs is some way to please the techy bloggers but still keep things simple for the general public. My suggestion would be to release phones with Sense but have a stock version ready to download via OTA if anyone preferred that.

      HTC make very good (even the odd great) phone but their branding is a mess with way too many models. They also seem to slip up with putting in one dealbreaker feature in otherwise fantastic phones (eg non-removable battery on HTC One X). Have to be honest though, I thought I'd be bothered about the SD card slot but on consideraton, I never got close to using up the 8GB on my Sensation so why would I worry about 32GB on the One X?

      I've got a HTC Sensation and a Nexus 7 and whilst I love most of stock Jellybean I really miss some of the Sense goodies of my Sensation and get quite annoyed when something I take for granted is not there on my Nexus 7.
      dale303
      • apps

        there's no reason HTC can't throw away sense and keep the core apps. and updates are about more than a 0.5% speed boost- they're about being able to use all those other apps in the app store. everyone notices when their phone can't use apps, not just techie people.
        theoilman
        • ...And which apps, exactly,

          don't run on a phone with HTC Sense? I have a phone with Sense and a phone without it. I've yet to find an app that ran on one, but not the other.

          Joey
          voyager529
  • The phones HTC should release:

    The HTC Business Sider: a corporate-friendly Android-based phone with a slide-out keyboard like the Blackberry Torch. Its subdued colors with silver accents give it the "Boardroom Look" that shouts 'corporate bling' louder than the senior accountant who just got an iPad. The HTC CorporateSync software supports the latest flavor of ActiveSync and also has a backend tool that will enable policies to be pushed to phones and will back up *all* user settings such that a replacement phone is a 90 second swapout and everything, down to wallpapers and alarm volumes, is identical on the new handset.

    The HTC Marathon: a phone as thick as two iPhones stacked on top of each other, but its removable battery can last for two days on a charge (or a day on LTE).

    The HTC Pure: Bone. Stock. Android. No tweaks, no mods, no carrier provisions. A blank slate that can take updates the day Google commits them to Github.

    The HTC Dropless: A phone that can get a sustainable signal on Mars. Its touted feature is its ability to make calls even in areas of bad cellular reception without dropping a call.

    The HTC Site: Designed for construction workers, this phone can withstand an accidental encounter with a jackhammer, and plaster accidentally spilled on the front can be scraped off using a box cutter without damaging the high-contrast screen. Its featured app is a software based DirectConnect-like service that does the transparent, instant walkie-talkie feature that gave Nextel their claim to fame last decade...except it's cross carrier.

    The HTC Trend: A glossy horizontal slider for teens that ships with Facebook, Twitter, Instagram, and WhatsApp out of the box. Five free ringtones and celeb wallpapers are baked into the purchase price and can be chosen by the user once its unboxed. Other available accessories include different color keyboards and front faceplates.


    Neither Samsung nor Apple have phones that can address these specific niches as well as these purpose-built units. All HTC has to do is stop trying to have one handset that is all things to all people.

    Joey
    voyager529
  • go vanilla

    Go vanilla plus the enhancements of their own. Kill the skin. That would bring in the Google experience plus their home made apps.
    hardrock2552
  • Author is right and wrong.

    I agree with the poster on some things. Having worked for multiple OEMs and a carrier, I feel I can put some inputs into his simple analysis.

    - One device across all carriers is a great strategy....But it is also the hardest thing to do. Apple needed several years to get the same device on all carriers and Samsung has only achieved this because they have the bank account to support this. HTC doesn't have the dollars in the bank to support a single device on all carriers, and to dictate the $199 price point that samsung is asking for.

    - Sense UI: A competitor recently did a study that I got to see around device OS experience and user satisfaction on Sense and it was nearly as high as iOS. TouchWiz was slightly lower and below that was Stock Android followed by the Motorola UI (can't remember it's name) and Blackberry. Moto's old MotoBlur was at the very bottom. People aren't going to go into stores and ask for an HTC if they used a stock Android platform. It first takes away any differentiation and they are getting positive feedback from the regular joe user who uses Sense, especially this version, which many sites like Engadget says how good it is. People asking for stock android are often the top 1% of the populations who come on to sites such as ZDNET.

    - The biggest downfall for HTC One has been marketing (at least in the US). It was awful. It was small (there was a commecial that was out for like a month then disappeared), the messaging was too simple (what is Amazing Camera about) and there poor followup if you wanted to know more. For example, go to the One X page on htc.com. There should be pages knocking you on the head on how good the camera is. Yet, there is one paragraph on the camera, it doesn't tell you anything! Instead they rely on the carrier to tell the story and we all know that the carrier care about Rate Plans and LTE. The Camera/Sound story drowned on the T-Mobile, ATT commercials I've seen.
    - Also, the authentic sound story is meaningless. What does authentic sound mean? It means nothing. If the sound is so great, they should demonstrate it. I think they are hoping you get it because you see a Beats logo.
    -With the small marketing spend, it got no traction so now that everyone and their mom sees a Galaxy s3 add with some cool features (which may or may not be benefiicial), they walk into a store and see both devices and they have never heard of the One, but they know about the Galaxy and they want the latter.
    - On top of it, they still have the s2, which is $99 or less, so if you don't want to lay out $199, you can get the Galaxy at half off.

    Having said that, how could HTC have won? If they weren't going to be smarter, they had to be bigger and they weren't both. They even had the goodwill to launch months earlier and could not capitalize on it.

    HTC's problem isn't the phone and OS, it is execution of a good marketing/product plan into the market. Samsung, with it;s strong business strategy around product and price and its strong marketing message around some unique features that WOW just pawned HTC and the numbers show it.
    casualsuede
    • Sorry, since you can't edit a post, I'll have to write an ADDENDUM.

      Excuse my grammatical and spelling errors. ZDNET should consider an edit button.

      When I said : People aren't going to go into stores and ask for an HTC if they used a stock Android platform. It first takes away any differentiation....

      I meant: People aren't going to start going into stores in droves if HTC started using a stock Android Platform. It also takes away any differentiation that HTC has from other OEM's.....
      casualsuede
  • my lifetime ban of HTC

    I have a personal lifetime ban of HTC and I let everyone who asks me about phones know this, and I get asked by lots of people. I have a two year old Verizon HTC *not* Incredible.

    Sure, the hardware is amazing. That's why I bought it. Stunning and magnificent. At this point, all I've had to do is open it and rework the power button, otherwise... no problem with the extraordinary hardware.

    But the OS? Ok, it is google's fault? Verizon's fault? HTC's? They all blame each other.

    The phone has never been able to connect to my main house router, because it can't handle the password. Yet, many other droids connect just fine. Sure, the password is a bit complicated, but I'm not changing it. I added a router just for the problem child HTC. This is obviously never going to be fixed, and there is no reason to believe if I buy another HTC, that it will properly run wireless passwords. And it's a droid... there is no way to get this issue looked at by anyone.

    Last November (2011) there were updates. At that point, the phone became a project, not a phone. The updates were forced, and caused me to factory reset more times than I can remember. Things finally stabilized, and then on 6/30/12 there was another update... a total disaster. The phone goes into a reboot loop at 2am EDT and reboots every three minutes for up to 3 hours. It does this for about ten days, then works fine for about 5 days, then repeats. Yeah, I've factory reset.

    I had to, because one time it rebooted... get this... it warned the system UIDs were corrupted. Guess what kind of confirmation dialog box I got? It said... seriously, get this... it said... not OK, or FORCE CLOSE, but... "I feel lucky".

    Who did that? Google? as a joke??? HTC??? Probably not verizon, though they would have if they could have. How can you make a joke and laugh at a user when you report the system is corrupted? The guy who wrote this better not ever come near me.

    Of course, I lost data yet again. HTC should at least have the decency to give users a good full back up to PC or at least to SD. Instead, I have a mishmosh of things and manual backup that I have to manage.

    No one is helpful. It's a three way good bad ugly firing squad with Google HTC Verizon and they are all the bad and ugly.

    Why am I running an old old phone? ok, I kept getting ready to pull the trigger on a Verizon Razr... then it was the Maxx. But you can't take the battery out. I can't believe that. If I don't want to be able to take the battery out, why didn't I go with Apple toys? Speaking of toys, thanks google... your "Toy Store" icon is not on any of my main screens.

    Another reason... I can't stand the idea that they don't have ICS on the Razr. And then, that when it goes on, I'll have another management project on my hands.

    So, I'm looking at the Samsung Galaxy S3. Samsung has always been banned by me for their proprietary charging plugs... again, why not just buy Apple if they are going to be that way? True, they are standard plugs now. They weren't on my LIFETIME ban for this.

    But read about the s3. hahahaha... it has *everything* known to man on it, but... it gets terrible reviews for cell reception in weak areas. Stunning. So, it's not really a phone. But at least the battery is accessible.

    There is no way I'll believe that there will be a phone which won't at some time need a battery removal reset.

    I am extremely saddened microsoft couldn't get anything going in this market. it's sad to compare the problems we lived through with their stuff... and everyone seems to accept far worse with Google.

    And just imagine if I got this HTC for my 85 year old mother. Wow. Should I buy her an iPhone?
    jturtora
    • non removable batteries aren't a problem for me.

      i used the nokia n8 for over a year never once felt the need to remove the battery for any reason.
      Emmanuel Umukoro