AH Primetime: Can HTC Recover from its Years of Mismanagement?

October 5, 2013 - Written By Cory McNutt
HTC CEO Peter Chou

What exactly is going on at HTC? Does CEO Peter Chou know what he is doing? When will HTC start to grow and show a profit or will they soon follow BlackBerry’s path to destruction – a company that had it all, but due to poor managerial decisions, is quickly being run into the ground.

High Tech Computer Corporation is a Taiwanese company founded in 1997 and began designing and producing mobile phones and PDAs based on Windows Mobile OS. In 2008, they officially changed their name to HTC Corporation. After making mostly Windows based devices, HTC expanded in 2009 to start making smartphones based on the Android OS and in 2010 added a Windows based phone to their lineup. During 2010 HTC sold over 24.6 million phones; up 111-percent over 2009 and at the 2011 Mobile World Congress (MWC) HTC was named “Device Manufacturer of the Year.” And yet, a September 2013 media report shows that HTC’s global market share is less than 3-percent and its stock prices has fallen 90-percent since 2011.

HTC’s bad decisions can easily be followed as HTC began its free fall. The smartphone business is one of the most competitive industries, and in order to be successful you need to be on the leading edge of technology and strike while the iron is hot. You must have a high-end phone for the U.S. market but also sell a lower-end model for the emerging nations with money being made at both ends.

HTC First
HTC First

One of those decisions came out in April 2013 when Facebook was looking to collaborate with a phone company for its forgettable Facebook Home device. They promised exclusivity to HTC and they figured this would give customers incentive to purchase the new device, so HTC released the HTC First for only $100, but Facebook reneged on its offer and released the “reskin” to HTC’s competitors, like Samsung. In addition to its loss of exclusivity, the Facebook Home received horrible reviews and died a very fast death.

The HTC One was supposed to be their Holy Grail – a beautifully designed aluminum smartphone with dual stereo speakers with Beats Audio (an entire story in itself), flagship specifications, an innovative camera, and on and on. However, HTC had problems with its part suppliers, especially parts for this magnificent new camera, causing delays and finally leading to a “partial” launch to selective markets. Their new smartphone never really got a fast start out of the gate and Samsung’s new Galaxy S4 was hot on its trail.  HTC decided to take the success of the HTC One and added an HTC One Mini, and are about ready to release an HTC One Max.

Mini One Max
HTC One Mini — HTC One — HTC One Max

Besides poor decisions and launches, HTC employees were jumping ship to other firms to seek the higher paying jobs that HTC’s competitors were paying. In May 2013, the Daily Tech wrote:

HTC’s Chief Product Officer, Kouji Kodera, reportedly quit the company last week. Other recent departures include Jason Gordon, the company’s vice president of global communications, global retail marketing manager Rebecca Rowland, director of digital marketing John Starkweather, and product strategy manager Eric Lin. And we’ve just learned that HTC Asia CEO Lennard Hoornik has also left the company.

HTC’s CEO Peter Chou promised to step down if HTC was not successful, yet is still hanging on after watching their profits and stock prices continue to tumble down. Samsung occupies the envious position that they manufacturer many of their own parts, whereas HTC must negotiate with outside suppliers for cost and then depend on them to deliver the components on time, something that was not working in the case of the HTC One.

HTC Americas President Jason Mackenzie
Former HTC Americas President Jason Mackenzie

The last quarterly report from HTC showed a third quarter loss of over $100 million, nearly twice as big as the analysts expected and once again, HTC officials were off their mark with their predictions of sales and profits. This pattern has gone on for the past two years with HTC continuing to lose money, struggling like both BlackBerry and Nokia, but even they had glimmers of hope at one point with small rises in their stock.  Even with HTC’s great engineering, and their use of the popular Android OS, they seem unable to make their business work.

How long can HTC continue to lose $100 million per quarter before they either change management or go out of business?  Apple and Samsung are the juggernauts in the smartphone industry that HTC cannot stop or even compete, with the management team they have in place at this time.  The management team seems to be in denial, employees continue to leave, sales continue to decline, and loss are mounting up – it is just awful to sit back and watch this happen to HTC, once “quietly brilliant?”