HTC's options dwindling

Rethink
HTC, once the vendor which led the Android assault on Apple's smartphone kingdom, is now joining BlackBerry and Nokia in the group of suppliers struggling to stay relevant in a market dominated by the Apple/Samsung axis.
 
Like those two wounded lions, HTC has upped its game in the quality of the hardware it delivers, but this has not been enough to address the challenges of playing in an Android sector where Samsung takes home the bulk of the profits and where the low end is increasingly targeted by Chinese suppliers.
 
HTC has suffered from self-confessed marketing mistakes; from dwindling ability to get the best terms from suppliers – a key Samsung weapon; and from a failure to differentiate sufficiently from other Android players. This has resulted in a succession of poor quarterly results and drops in market share.
 
Fears for the firm's future are mounting further as a string of senior executives leaves. The most high profile departure came as HTC acknowledged this week that its chief product officer, Kouji Kodera, has left, despite having headed up the launch of the new flagship HTC One – widely well reviewed and a strong Android smartphone, but still overshadowed by the mighty Galaxy feature list, marketing machine and supply chain.
 
Kodera joined HTC in 2010, amid some fan-fare, from Sony Ericsson, and was part of a team placed in charge of a renewed push to turn out high profile superphones. He is replaced at HTC by Scott Croyle, previously VP of design.
 
Other recent defections have included Asia region CEO Lennard Hoornik (according to CNet); plus Jason Gordon, VP of global communications, whose role has currently been taken by CMO Benjamin Ho; global retail marketing manager Rebecca Rowland; director of digital marketing John Starkweather; and product strategy manager Eric Lin. Lin, who left for Skype, even tweeted colleagues at HTC to head for the door, urging them to “just quit, leave now.”
 
 
Like BlackBerry with the Z10 and Nokia with the new Lumia, HTC is waiting to see whether the HTC One will deliver on its daunting mission to activate a turnaround. Announcing record low profits for the first quarter earlier this month, HTC executives forecast a sequential sales increase of about 65% in the second quarter, because of the One. The firm says it is increasingly production to meet demand, though its relatively weak position with suppliers, compared to larger scale vendors, was demonstrated in recent complaints of component shortages and delays.
 
By sad contrast with HTC's problems, Samsung said its new Galaxy S4 just hit 10 million sales, less than a month after shipments started. HTC certainly needs to attract a high profile new executive to reinvigorate design and build investor and customer confidence. It also needs to be more aggressive and successful in new form factors, such as tablets, where there will be more growth and margin than in handsets. It is notable that the three suffering majors – HTC, Nokia and BlackBerry – have all stayed back from, or largely failed in, the tablet space.
 
Consolidation beckons in the smartphone-only segment because of the inevitable shift to firms which can command massive share – this trend was seen in the pre-smart era, in deals like the acquisition of Siemens (the world's number three handset maker in 2003) by BenQ; and the creation of Sony Ericsson. To avoid being the new Siemens, HTC either needs to expand its range and deliver a knock-out device in a less crowded category than cellphones, or start looking for a purchaser.

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