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Where did it all go wrong for HTC?

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As HTC makes job cuts and posts big third quarter losses, we take a look at why the One M9-makers is struggling to keep up with Apple, Samsung and newcomers like OnePlus.

HTC is not very well. The Taiwanese smartphone manufacturer has returned to loss-making ways, with a catastrophically poor Q2.

Back in March, on the back of the disappointing launch of the underwhelming HTC One M9 flagship phone, HTC demoted co-founder Peter Chou as CEO. Fellow HTC co-founder Cher Wang was instated in his place.

There has been no immediate turn-around, however. In fact, after four consecutive quarters of slender profits, the company has reported a Q2 operating loss of NT$5.1 billion. That's about £101 million.

As a result, on August 6th, the company hit its lowest stock price in ten years, while it struggles to be a part of the group of leading smartphone manufacturers in the world.

All of which prompts the question: where did it all go wrong for HTC?

See how the HTC One M9 stacks up to its major rivals:

Related: Best smartphones of 2015

Squeezed from both ends

HTC was one of the pioneers of the modern smartphone revolution. It made the first ever commercially available Android phone, the T-Mobile G1 (aka the HTC Dream) in 2008. In 2010, Google chose HTC to make the first official Nexus phone, the Google Nexus One.

Yet here in 2015, it is being overwhelmed by massive competition at both ends of the market.

The company's own Q2 overview describes "Weaker than expected demand at the high end" - which basically means that no one is buying HTC's latest flagship phone, the HTC One M9, or the problematic HTC One M9+ revision (pictured below).

We'll go into the issues with the brand's current flagship later, but the most obvious and basic reason people aren't buying the HTC One M9 is because they're buying the iPhone 6 and the Samsung Galaxy S6 instead. These are formidable high-end rivals that no one seems capable of matching.

The trouble here is that HTC's reputation for making classy phones initially made it reluctant to engage with the low-end of the market, and rival efforts from the likes of China's Xiaomi and America's Motorola are now squeezing the company from the opposite end.

The HTC Desire range has made virtually no impact against phones that offer better specs for less money.

Related: Top 10 best Android phones

One M9 Plus

Saturated market

Indeed, there's a wider point to be made from the tight squeeze HTC has been place in. There are simply so many phones out there, and most of them are awfully similar.

If you're a smartphone manufacturer and you're not Apple, then you probably make phones based on the Android platform. It's the world's biggest smartphone platform by some margin.

That involves dozens of manufacturers from all corners of the world, all releasing largely similar phones made with similar materials, and running on largely identical components.

What's more, the general standard of those rival efforts has risen markedly. The HTC One M7 was a feat of engineering when it launched with its all-metal body. Now even Chinese startup manufacturers are producing such phones.

How does a company like HTC, which used to be known for its distinctive premium designs, make an impression when other companies are able to offer something similar for less?

Lack of smartphone innovation

The answer to that last question is that it doesn't. The HTC One M7, HTC One M8, and HTC One M9 are all attractive, well-built phones, but what do they really offer that's different to the rest?

We've mentioned that sleek metal design, but that was never enough in itself, and it's now far from unique.

Efforts to distinguish the range's camera, meanwhile, have ended in disaster. Successive HTC phones have had deeply flawed camera units, such as the HTC One M8 that sported an innovative dual-lens, low-megapixel setup, but took inherently noisy images.

Even HTC's custom Sense UI, which used to be seen as one of the better, cleverer efforts, is now seen as needless tinkering when the core Android experience is so fundamentally sound.

HTC ONe M9

Conservative design

We've mentioned already that HTC built its reputation on producing classy, premium-quality smartphone designs. Its motto even used to be "Quietly Excellent."

Indeed, even with the troubles we've touched on elsewhere, HTC always makes excellent phones. Or at least, it used to until very recently.

It's easy to forget that the company returned to profit this time last year thanks largely to the excellence of the HTC One M8. Operating profits for Q2 of 2014 were NT$2.26 billion, or £44 million.

The company's mistake was failing to build on that small amount of momentum and good will, instead choosing to release a nigh-on identical phone in the HTC One M9.

You might argue that Apple is also in the habit of releasing inherently similar phones in successive years, but a) that's from a position of class-leading strength and b) Apple changes its smartphone designs completely every other year.

The HTC One M9 would perhaps have been excusable if it hadn't been the third phone in a row to sport the same basic design after the M7 and M8.

Peter Chou

Lacking Samsung's deep pockets

It's a vicious circle HTC is in, but the reason HTC isn't selling as many phones as Samsung or Apple is largely because it doesn't have anywhere near as much money as them.

To place it into context, during the four relatively positive quarters prior to its recent Q2 catastrophe, HTC made £75 million in net profit.

That sounds pretty good for a year's work, until you compare it to Samsung's figures. HTC's biggest natural competitor made £12.37 billion in net profit during the same 12 month period.

And let's not forget this has been a poor spell by Samsung's own standards.

HTC simply makes much less money than its direct rivals. That means less money to spend on advertising, less to spend forging relationships with network operators, and less to spend producing and pushing your products into lots of countries around the world simultaneously.

Other, even smaller companies get by on clever marketing and lower overheads (think OnePlus), but that just highlights those earlier issues. HTC is still competing on Samsung's and Apple's terms, producing traditional premium products at traditional premium prices.

HTC has proven that it's capable of taking Samsung and Apple on at their own game from a pure product perspective, but it simply can't get close when it comes to selling that product.

Something's got to give, and you fear that something might be HTC's future as an independent smartphone maker.

Do you think HTC's smartphone business will survive? Let us know your thoughts in the comments section below

Zeus

August 17, 2015, 1:57 pm

Nice Article. Based on the new crap Samsung is trying to make us swallow, you might be writing one about them too soon.

rolf

August 17, 2015, 2:26 pm

The world is a very messed up place, most people are stupid brainwashed zombies. That's why HTC is struggling, not because they don't make great products but because people are stupid. Well, maybe if HTC was smarter and exploited peoples stupidity they would've been better off. ;)

chris

August 17, 2015, 4:47 pm

Problem is the market in general.

Take out Samsung and Apple

The rest combined made so little cash in the last year that it bearly registers. On most profit guides for the Smartphone sector Apple and Samsung have broken passed 100% combined with some major companies loosing alot of cash.

HTC used to be the king of Andriod. Other companies offered what they did for better value and they have had alot of hit or miss high end flagship products. For a company that prided themself on been the Flagship Andriod that has cost them many users.

Even Samsungs £12billion net is nothing compared to what Apples made in the last 12months. Apple has a profit of around $57billion net in the last 12months.

Smartphone sector is not really a competitive market no matter how much people might like to think it is. Apple and Samsung dominate with everyone else fighting for a distant 3rd place. 3rd place = survival in 90% of the cases.

Not all of Samsungs income is Smartphone related. Even if they stopped selling Smartphones completely they would still make a profit each month.

Kulti Vator

August 17, 2015, 6:31 pm

Sad day for HTC - they cut their teeth in mobile building some really nice hardware for the first few ARM-based Palm devices (Palm V onwards IIRC) - when Palm's PDA's went from cheap feeling plastic slabs to something that had a more premium air.

It takes a lot of R&D dollars to design and tool-up for the manufacture of a high-end flagship handset - must be some tough decisions ahead unless they can find a way to grow their sales pretty dramatically.

Xchris

August 17, 2015, 6:56 pm

The media has also played a large part in their demise. Samsung can't do any wrong even though their flagship is a buggy mess of a phone. As for one plus. Journalists have creamed themselves over a second rate brand. Android is dead.

LeeTronix

August 17, 2015, 7:21 pm

I agree the media has played a large part and just look at Blackberry, what gets me is the fools who buy into these media wannabes and there seems to be a lot of them around!

LeeTronix

August 17, 2015, 7:31 pm

I agree, they made some really nice build phones and pioneered video streaming and various other internet based services long before appleBling was around in the phone market. As for SG they build rubbish quality and charge the earth. I mean 2ml band of alluminium is hardly premium and its not exactly that thick either and then you have all that awful bloatware. It seems SG just want to ignore whatever the customer wants these days just like appleBling.

Dead Words

August 17, 2015, 9:29 pm

HTC has made some pretty bad mistakes, I admit, but so has every manufacturer. The problem with HTC is that they were already in a position where making mistakes pushed them down further then they could operate from.
Samsung makes mistakes all the time, yet they have the money and position to recover quickly and move on as if it didn't happen. Apple is the same way. If top dogs like HTC or Microsoft make the same mistake it's devastating for them. They're still competing directly with Apple and Samsung, and they're technically "on even grounds" but they're position is far more precarious.
I rather like HTC. To be honest, I don't like the majority of their phones. I'm not a fan of the Desire range, the Nexus 9 wasn't that great, and the black HTC bar underneath their phone's screens has always bugged me. However, when they make an amazing phone they make an AMAZING phone, and that's something not a lot of manufacturer's can do. I hope HTC finds a way out of this, but it isn't looking good. Android no longer is the way to success for phone manufacturer's, because companies like Samsung and Chinese manufacturers like Huawei and Xiaomi are drying up the market.
I really hope Microsoft finds decent success with Windows 10 Mobile (okay, lets face it, as an operating system Windows Phone isn't doing very well, but as a manufacturer Microsoft is actually selling a decent amount of phones on their own), and I hope HTC finds their way back to profits again.

toboev

August 17, 2015, 10:20 pm

Uh, no. Samsung pushed out the original Note to gales of laughter from journalists, but found they had a winner, a lead which the entire market (even Apple) has followed.

Touchwiz is constantly derided by journalists who get misty eyed for "pure" Android.

And journalists have consistently beaten Samsung with the "premium" stick, until at last Samsung capitulated and joined the mad crowd making sealed phones out of glass and aluminium.

HTC of course bowed to that pressure a while ago, and the journalists fawned over the M7. HTC believed the reviews so fervently that they kept the same design ever after, only changing the name. Fat lot of good it did them.

Romdude

August 18, 2015, 4:53 am

Yeah, I still love my HTC One M7, I haven't upgraded because I kept thinking surely this is the year they will listen to all their fans, passed the M8 and finally passed the M9. They are just so set in their ways and apparently don't have the know how and innovation to change. As for the One Plus, doesn't everybody know that is an Oppo-owned company? Who comes into a market out of nowhere and pretends to trump everyone with an apparently very deep pocket? Let's not even start on the state subsidies that China provides. I'm looking at the next Nexus or a Motorola, now if they can only come up with a design that stood out like when HTC hit with their one hit wonder, the HTC One M7.

Mark G

August 18, 2015, 5:33 am

HTC design has always been decent, where they keep having issues is the camera and screen.....htc has a opportunity now to steal market share now that samsung has forsaken their loyal customers.......The task is simple, make a phone with 2k screen a ios camera, microsd and a huge battery .....thats it

fried_egg

August 18, 2015, 9:25 am

The "desire" was the phone to have and then.... they got bland with the looks and then got "confusing" with their functions... no one wanted to be "told" how their camera was as "good as, if not better" when the average buyer "plays top trumps" with the specs - the same way as AMD and Intel used to name their chips so as to look better than the other under the same "measurement" - and then there was the UI... they stuck with their own when Google's nexus simplicity was the benchmark.

fried_egg

August 18, 2015, 12:33 pm

Oh and their awful adverts... how many people bought a phone because of that dreadful car wash advert (and others at the same time)... sorry, but you are in a really competitive market.. Samsung/Sony/LG/lenovo-motorola & the chinese me-toos all have a claim on android, microsoft is trying hard to grab the "alternative choice" and apple have a crazy cult following that will be strong for a while yet... so how do you stand out? it is not by being a "quietly brilliant" secret... unless you are differentiation pricing like vertu does, and it is not by having stupid green things in a car wash.

toboev

August 18, 2015, 7:24 pm

Yeah, I think you've hit the nail on the head - it's the customers' fault.

jasonlowr

August 19, 2015, 4:51 am

trust me, no matter what they do, its already too late. yes, i was one of those samsung fans who was pissed at samsung for removing sd and removable battery, but after using the s6 edge, i dont even care and happy again with my purchase.

bronxboi

August 20, 2015, 12:04 am

From my first Android, G1, to now, M8, I have always owned HTC. I was really disappointed with the M9 and that was the first time I decided to take a pass. I will wait until the M10 to see what they have to offer. HTC, has built great phones and I have never had any major quality issues that could not be fixed and I have only had to RMA one or two phones. I have been very happy with them and will give them one more chance.

Ovidiu Naso

September 3, 2016, 8:42 pm

HTC won't survive. People having already a HTC, are not happy with support. I had 3 and won't buy other. They are liers. I expected my 820 to be upgraded to android 5 and then 6, but the timeline was changed every time. After one year and a half still no upgrade.
For me they are dead. I said that to all my friends. At least 15 of my friends won't buy any HTC for sure.

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