HTC: Phasing Out Or Phoenix?

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It was announced recently that Cher Wang would replace Peter Chou as CEO of HTC. Chou has now taken up a role in the Future Development Lab, as a drastic shift was almost inevitable considering HTC’s recent performance in both share price and market share. However this could be a case of too little, too late.

Employees of HTC spoke to us recently at a conference and when asked about the future of the company with Wang as CEO, they stated that in their personal opinion there would be no remarkable changes or fundamental shift to the company which would carry on its current path. This must be a case of hubris, it is clear from the figures that the company does in fact need to turn itself around and adapt. During the first quarter of 2014, BNP Paribas placed the market share at just 1%. Whilst they managed to claw back their share up to 1.6%, according to the Marketing Intelligence & Consulting Institute and DigiTimes Research, even this brief respite is expected to drop to just 1.4% this year. This is even more disappointing considering they had a 2.6% market share in 2013 as reported by Gartner. We were told that Cher has been increasingly working with many of the employees and various aspects of the business over the last two years and there is an air of optimism over the change in leadership.

HTC has big things planned for this year, but so far they seem beset with problems. Their VR headset, the Vive which has been developed in conjunction with gaming company Valve, is due to ship to developers this spring. Due to the 90HZ refresh rate, the device is still required to be connected to the PC in control via wires making it less than perfect for the freedom of movement they originally intended. They still hope to have a commercial model ready before the end of the year, which would make sense if they wish to target the winter holiday market. Another issue would appear to be the price tag. In an interview with MCV, Jeff Gattis, head of marketing for HTC, said “Starting with the premium experience, even if it has a slightly higher price point, is the right thing to do from a strategic point of view.” The price tag is set to decrease eventually but as we know initial sales can make a big difference as to how a product is perceived by the masses.

The company has also recently announced their “Uh Oh” service, whereby they will offer new users a one time replacement in the first 12 months of purchasing a new HTC One M8 or M9. The service will cover you for cracked screens, water damage or even a change of carriers. If you do not need to use this service, they will gift you $100 off your next HTC One device. This excellent offer is currently only available in the US and when asked about the service coming to Europe, we were informed that they are not announcing or supporting “Uh Oh” in the rest of the world yet, due to the requirement of factoring this service in to build costs of the devices. However at the same conference, Huawei owned Honor discussed their own replacement service which will cover the UK in a trial before moving to other countries, where upon damaging your device Honor will ship you a replacement the same day and pick up your old. With this expected emulation of the service from other OEMs, HTC may find that outside of the US their market share will decline as consumers who are attracted to this offer seek out other manufacturers (we expect more companies to follow) who will stand by them when they need it.

The One M9 was recently discovered to reach a cozy 132 degrees Fahrenheit during the GFXBench benchmark test when run by Dutch company Tweakers. After getting the chance to use one of the devices yesterday, we were informed that benchmarks were not allowed due to the device not being a final commercial product. Whilst an OTA update has been said to cool the device, the damage may have already done. In just five minutes around the HTC booth at March Of The Droids, we heard plenty of quips about the device. Instead of being known for its exceptional audio, 20MP camera or larger battery this device seems fated to go down in history as the device you could cook a steak on. This is unfortunate as research by Pew shows that the majority of Americans perform research on a product online before purchasing, it is not long before any one searching for information about the M9 on Google runs into a wall of articles and sites about this issue.

HTC is now trailing behind many Chinese manufacturers such as Huawei, Lenovo and Xiaomi who are rapidly expanding, with many of these companies offering high end devices for less. These companies are adapting to the current markets much faster and as such we may eventually see them take on the US and European markets to the same affect. If Wang hopes to bring the company back to the position they once had, they will have to make quick changes.

HTC has a long history of creating exceptional devices and also has a strong and long lasting development backing, starting with the first commercially available Android phone the HTC G1 which even had a working version of CM10 Android 4.1.1 released. They are not disappearing anytime soon and if they can establish their new products and services we could see them become the power they once were. The recent change of power could be just what the company needed, allowing for a new strategy and change of direction. Even without large changes in the immediate future, Peter Chou and Cher Wang surely can now focus their efforts on the parts of the company that will benefit most.