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HTC's nosedive blamed on scant smartphone innovation, fierce competition

Matt Hamblen | Aug. 12, 2015
Upcoming VR headset and possible Windows 10 Mobile smartphone offer glimmer of hope.

When a publicly traded company goes private, it can avoid an involved process of courting of, and second-guessing, by investors and can operate more freely in innovating, analysts said.

"HTC is caught between Apple, Samsung and LG at the high end and the local [Asian] heroes at the low end," Moorhead said. "This is probably the worst place to be positioned. HTC should reconsider retrenching and focus on fewer geographies instead of going after everything, everywhere."

He urged HTC to partner with Qualcomm on basic smartphone designs and Sony on cameras "so they don't have to shoulder the R&D burden."

Better marketing, if there's cash

"For HTC to turn this situation around would take a lot of marketing funds and a prolonged campaign," Gold said. "But at this point, I'm not sure HTC has the resources, especially with new competition from resource-rich companies like LG, Huawei and Xiaomi."

He added, "With the profit margins of phones decreasing, it seems a downward spiral will continue for HTC."

HTC's decline "has a lot to do with the fact that the brand has lost some of its polish, and the offering is becoming incrementally better but nothing that different from the previous model," added Carolina Milanesi, chief of research at Kantar Worldpanel. "HTC would need a different design as well as a lot of marketing investment to be able to compete with the large marketing budgets that Samsung has or the strong presence Apple has."

Milanesi agreed that it would be difficult to find a buyer. "The HTC brand will not add value to an up-and-coming vendor," she said. "HTC just doesn't have anything that sets them apart from their competitors."

'No cards to play'

Dediu said when a phone maker loses its profitability, as HTC has, it can't make independent choices and provide innovations. He pointed to Siemens, Ericsson, Alcatel, Motorola, Palm, Nokia, BlackBerry, Toshiba, Panasonic, Kyocera and others that have fallen victim to this trend.

"HTC was teetering two years ago and it's surprising it's still around today," Dediu said. Minor players can win or lose based on the network operators that sell their devices. "Operators treat a declining brand as a toxic liability and shrink the available shelf space" where products are shown to customers.

"Failure has nothing to do with product quality or performance," he asserted. "The only protection from oblivion [imposed by operators] is when consumers demand a product. It's very difficult without either a clever marketing campaign or differentiation in the Android ecosystem. Since Android vendors can't create ecosytems of their own, they have to out-market the competition."

In the case of Samsung, it has deployed "tens of billions" of marketing dollars to gain its top place, Dediu added. "That approach is impossible for smaller companies."


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