Smartphone maker HTC said it will return to making less expensive smartphones in an effort to shore up its shrinking revenues. The announcement comes about a year after the company first announced its high-end, flagship One smartphone, which was relatively well received but failed to ignite sales at the Taiwanese vendor.
The news also comes as HTC announced it will report first quarter sales and earnings below analysts' expectations. The company also announced a wide-ranging patent settlement with Nokia that will end all patent litigation between the two companies and will also add HTC's LTE patents to Nokia's patent licensing portfolio.
HTC's return to the low- and mid-range smartphone market represents an end to its attempts to focus solely on the high-end smartphone market with its $600 One phone. But HTC is not the only smartphone company to make such a pivot--Samsung and Apple (NASDAQ:AAPL) have both made efforts to lower the prices of their products in hopes of expanding their sales into emerging markets, where shoppers can't afford $600 smartphones.
"The problem with us last year was we only concentrated on our flagship. We missed a huge chunk of the mid-tier market," HTC Co-founder and Chairwoman Cher Wang told Reuters. HTC CFO Chialin Chang told Reuters that the company expects its forthcoming cheaper smartphones to provide the majority of HTC's revenue after the first quarter.
The company also said it plans to improve its marketing this year while it pushes its less expensive phones. HTC last year employed "Iron Man" start Robert Downey Jr. for its One advertising.
HTC's re-entry into the mid- and low-end smartphone market marks a notable change in the company's thinking from just a year ago, when CEO Peter Chou rejected the notion that the firm should shore up its business with less expensive devices. "We don't want to destroy our brand image," Chou said in an interview with the Wall Street Journal in July 2012. "We insist on using better materials to make better products that offer premium experience. Many consumers like that."
To be clear though, HTC isn't planning to retreat completely from the high-end market. The company promised to issue invitations to the announcement of its One successor within the next few weeks. The successor to the One will reportedly sport a thinner design and larger screen.
As for HTC's finances, the company reported a decline in revenue to $1.41 billion in the fourth quarter, but it did manage to notch a profit during the period of $10 million. However, HTC forecast continued declines in revenues in the first quarter, along with a net loss--results lower than analysts had expected.
HTC also said it will make patent licensing payments to Nokia, though HTC did not reveal exact terms of its agreement with the company. The agreement is notable considering Nokia is focusing more heavily on its patent-licensing business following Microsoft's purchase of its handset business, a deal that is expected to close in the next few weeks.
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