HTC Quietly Dying Big New Hit Phone Needed

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Top of the Pops one minute, looking for a hit product the next, HTC the Taiwanese phone company that has spent the last 18 months being a pain in the side of Apple and Samsung has suddenly hit a brick wall with their share value falling 60% in recent months.Also set to impact the company is a recent court loss in Germany that could see popular HTC Android smartphones removed from shelves after German patent firm IPCom won a patent injunction against the company.

The German problem comes just two days after HTC shocked markets by cutting its fourth-quarter outlook, since then HTC shares have plunged with analysts tipping that they will fall another 6% on Monday when the Taiwanese markets open.

Last month the company launched two new Sensation models that incorporate their recently acquired Beats Audio technology. In February the company is tipped to launch their thinnest phone yet at just 7.9mm thick with the introduction of the Ville, HTC’s upcoming Android 4.0 device.

The device will run Ice Cream Sandwich; have a 4.3-inch Super AMOLED display with qHD resolution and a new 28nm dual-core Snapdragon processor running at 1.5GHz.

As is standard the device will have dual cameras 1.3MP/8MP, 1080p capture and support, Beats Audio, HSPA+ and a 1650mAh battery.

Last week HTC stunned markets when they announced their second sales and profits downgrade.

HTC warned earlier in the month that revenue would fall by up to 8 percent in October-December from the third quarter, and then late last week it flagged a much bigger drop, citing tougher competition and the global downturn.

The stock has fallen 30 percent in eight straight trading days.

HTC is struggling to compete with the popularity of Apple’s iPhone, the new Motorola Razr and Samsung’s Galaxy line.

Reuters said that with Nokia’s fall from market dominance still fresh in the memory, and BlackBerry maker Research in Motion losing ground, HTC needs to recapture its innovative drive to make sure it maintains its position.

“It won’t be easy for HTC to get out of the mess it’s in right now,” said Simon Liu, deputy investment officer at Polaris Group’s fund unit.

“Still, it’s not the end of HTC. It’s certainly not another Nokia. Nokia missed out on the smartphone market from the very beginning, and didn’t develop applications as well as Apple.”

Sales at HTC — whose models include Desire, Sensation, Wildfire, Rhyme and ChaCha — grew four-fold in a year and a half, and in the third quarter of this year it sold more smartphones in the United States than any of its rivals.

But its cracking performance is sputtering as it fails to bring out new products to rival the iPhone and Galaxy in the high-end smartphone market.

 

 

HTC, valued at around $14 billion, saw a bigger build-up of unsold inventory than rivals in the third quarter, a portent of weak sales in the crucial year-end holiday season.

“Aside from rising competition from Apple and Samsung in the high-end market, aggressive price competition from Huawei and ZTE at the lower-end could put further pressure on HTC’s margin,” said Laura Chen, analyst at BNP Paribas.

“We believe HTC is reviewing its product roadmap to regain market share in 2012. However … most of its new products are to be launched only late in the first quarter.”

HTC is also re-evaluating its $300 million acquisition of S3 Graphics after the graphics technology firm lost a U.S. legal battle against Apple, raising the spectre that HTC products could be banned from the United States — where it earns half its revenue. HTC had planned to buy S3 to beef up its defences in its own separate lawsuit battle with Apple.

These headwinds have pushed HTC shares down more than 60 percent in six months, making it the worst performer among major handset firms, along with RIM.

“HTC hasn’t offered enough new models, and hasn’t been aggressive in its pricing strategy,” Barclays analyst Dale Gai wrote in a client note. “We believe Samsung leads HTC in most high-end models, including LTE phones, where HTC has failed to compete on form factor.”

Gartner’s Lu, however, sees little risk of HTC going the way of Nokia.

 

“Basically, HTC is on the right track, but it will take time for its brand- and retail-building. It’s in way better shape than LG, RIM and Motorola. But it’s true it’s not as competitive as Apple or Samsung.”

Annie Lu, a spokeswoman for HTC, said the company remained confident about driving new technologies. “HTC has a strong and complete portfolio in both high-end/premium and mass market high quality products,” she told Reuters.

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