HTC's Chou: We must 'kill bureaucracy,' work to regain smartphone edge

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HTC CEO Peter Chou admitted in an internal memo to staff that the company had slowed down due to burdensome bureaucracy, but said that with renewed focus it can regain its edge.

HTC Peter Chou

Chou introduces the HTC One X.

The internal memo, sent to Chairwoman Cher Wang and the company's staff, underscores the critical moment HTC finds itself in with sales falling and analysts and investors questioning the company's strategy. The memo was first uncovered by the Wall Street Journal and confirmed by HTC to the Journal and other media outlets.

Chou said that there was a lack of "decision, strategic direction or sense of urgency" within the company despite many meetings to hash things out. "Please make sure that we kill bureaucracy," he wrote. "Make sure [that] we are doing the right thing quick and make it work."

The memo, in which Chou laid bare what he sees as the weaknesses that have befallen the company recently, comes as HTC is trying to regain its prowess in the market by slimming down its product portfolio and focusing on its One series of phones. HTC is also looking to China for growth after seeing its market share slip in the United States and Europe amid tough competition from Apple (NASDAQ:AAPL), Samsung Electronics and others.

"Our competitors can leverage their scale, brand awareness and big marketing budget to do things which HTC could not do," Chou wrote. "The fast growth from the last two years has slowed us down."

According to research firm Gartner, HTC's market share slipped to 2.2 percent of the global handset market in the second quarter, down from 2.6 percent in the year-earlier period. IDC reported that HTC's share of the global smartphone market slipped to 5.7 percent in the second quarter, from 10.7 percent a year ago. HTC's shares have tumbled recently, leading some analysts to call it a takeover target.

"Do not be influenced by noises from the market and the industry," Chou wrote. "We are a strong player in the market and we are just having short-term challenges."

Chou sought to give a pep talk to his employees as well, writing that the Taiwanese smartphone maker, which made the world's first Android smartphone as well as the world's first Windows Mobile phone, needs to build on its culture, "committed" employees and customer relationships. He noted the One X is a highly rated product and that the company has a strong portfolio for the rest of this year and next.

"Stay firm with the hero innovations and make them even bigger and deliver them," he wrote.

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this separate WSJ article (sub. req.)
- see this third WSJ article (sub. req.)

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