Once a rising star, HTC continues to lose its lustre as it not only faces increased competition from Apple and Samsung, but also due to alleged patent infringements and limitations on future products. HTC this week experienced a triple dose of bad news on all fronts as its struggles continue.
A revised outlook
The trifecta of gloom hit all at once on Wednesday, starting with news from HTC itself. The company warned that its past guidance for the second fiscal quarter of this year is invalid, and it was revising it downward, saying:
HTC has also revised the 2Q 2012 guidance to be NT$91bn in revenue, 27% in gross margin, and 9% in operating margin. This revision includes a one-time charge of NT$2.6bn to facilitate the clearance of channel inventory for certain products shipped from last year. Without the charge, the revenue, gross margin, and operating margin would have been NT$93.6bn, 29%, and 11.2%, respectively. The revised revenue is due to lower than anticipated sales to Europe, and the delayed shipment and launch of certain products in the US.
The “delayed shipment and launch of certain products in the U.S.” surely pertains to the HTC’s new flagship One series of smartphones, but the downward revision is the third in as many quarters; an alarming trend.
The HTC One phones are now shipping in the U.S., but were delayed due to an ITC ruling based on HTC infringing on an Apple patent. The good news is that a software modification last month mitigated the issue enough to get phones delivered, but the bad news is that Apple feels HTC’s workaround isn’t enough.
More potential patent woes
The Cupertino-based company filed another complaint with the ITC this week suggesting two things: That HTC’s software change on the HTC One phones still infringe upon the patent and that 29 total HTC phone models should be stopped from entering the U.S. Not only could this present more shipping woes for the HTC One models, but also for stock replenishment of older models; effectively closing down HTC’s U.S. sales once current inventory is depleted. Clearly, that’s a worst case scenario.
No Windows 8 for you…. NEXT!
Making matters for HTC’s future worse are reports on Wednesday night that the company won’t be allowed to develop devices running Windows 8 RT. This version of Windows is exactly what HTC needs to compete in the market for tablets and computers that run Windows on a smartphone chip. The company has limited experience with Windows platform design, but it stands to benefit from early sales of low-cost Windows 8 tablets. Or at least, it used to.
It’s almost sad to see HTC in the crosshairs these days as the company has gone from a behind the scenes player to a center-stage star in short order. HTC was one of the most prolific Windows Mobile handset designers, yet few knew the company as the phones were all re-branded with carrier names.
Recently, HTC decided to boost brand awareness and found great initial success by adopting Google Android as Windows Mobile sales declined. Now, I have to wonder HTC regrets building its brand name: All of its competitors — even its partners — know exactly who to sue or shut out from future products.