Due to global macro economic downturn and market competition, the assumptions of 2011 Q4 financial forecast provided earlier are no longer applicable. HTC expects 2011 Q4 revenue to be approximately the same as Q4 last year. Despite 2011 Q4 revenue is not what we expected, HTC has strong confidence in its products and operation. We expect that growth will return in 2012 H1. – HTC statement on sales outlook
This comes as an even more peculiar occurrence especially because the holidays are around the corner and for many companies, this represents the make or break moment to determine which way sales will be headed. But HTC seem to be preparing for tougher times ahead and are simply trying to pre-empt the inevitable. Here are some major hurdles HTC have to contend with in their fight to keep their glory run going and not lose steam:
Loss of S3 Patent Infringement Case Against Apple
HTC was planning to buy graphics chip maker S3 for $300 million largely for the patents that the graphics company has but this plan just got a dose of cold water thrown on it after a ruling made by the ITC found Apple in the clear on the patent infringement allegations. Now HTC find themselves having to back pedal as they try to find the best way to leverage the S3 angle or if it would be better to just boot it. After the ruling, HTC expressed their disappointment:
HTC is disappointed at the outcome of the recent ITC ruling that stated Apple did not infringe S3 Graphics’ patents. S3 Graphics will continue to appeal. HTC has made significant effort in preparing for these complicated legal proceedings, including a complete legal investigation and comprehensive report on patent and price evaluations. HTC had decided to acquire S3 Graphics based on the strong belief that evidences of patent infringement from Apple were clear and ITC ruled in its initial determination that Apple had infringed two patents from S3. In light of recent development, HTC will work closely in good faith with VIA Technologies and WTI Investment International.
Escalating Competition from other Android Phone Makers
The Taiwanese company started off its business as a company that made phones for carriers but decided to go it alone on the back of robust demand for Windows Phones back when there were just Symbian phones to compete with. Having had tremendous growth over the past 2 years which saw their smart phone market share jump from 6.7% to 12.1%, that blazing run seems to be being slowed down by the very factor that started it; Android.
Android brought salvation to HTC but the fact that electronics gorilla Samsung jumped on the bandwagon has left HTC outmatched and out-gunned by this big-budget company. What’s more, Samsung is an extremely vertically integrated company meaning they can pretty much build a smartphone from start to finish in-house as they already manufacture most of the components that go into it. Add to this large-scale manufacturers ZTE and HUAWEI, both of who have huge markets in China and may not necessarily care much for margins at the moment.
Lack Of Product Variety
HTC are not all that well-known for creating new, stylish handsets that make you want to upgrade. Instead, they have adopted the Nokia-style way of releasing one new version after another without any significant changes in the general design and features. This has made it hard for the smartphone maker to create any new buzz around their new products, something Samsung and Apple seem to have perfected.
This trend does not seem to be working out well because the smartphone market is driven by vanity buyers and early adopters, two groups HTC is currently doing a poor job of reaching. In addition to this, HTC is primarily a high-end smartphone market player, something that may be good for differentiation and specialization but potentially bad for competition. In as much as they may be able to compete with Apple on this level, other phone makers such as Samsung and Motorola have a full range of phones, which makes it harder for HTC to compete effectively.
But in the midst of all these pitfalls, HTC are still the number one smartphone seller in the US and are on course to selling over 50 million units in 2011. And it seems they are only contending with challenges that are specific to the smartphone industry rather than to any particular company. BlackBerry maker RIM and Motorola Mobility have also had their own set of problems to contend with.
HTC have been recently linked with both Google’s Chromebooks and a Facebook smartphone, both initiatives seeming to be poised to rekindle the sales mojo HTC seem to be losing. This may or may not be the best move, especially because neither Google nor Facebook have any experience in the smartphone or tablet industries. But it will be yet to be seen how HTC sales fare, especially come January, after all the holiday fever has died down.