HTC pulling out of Brazil and Korea: What led to them failing so much?
Formally known as High Tech Computer Corporation, HTC started its business by manufacturing notebooks, but later focused on smartphones. It was the first to manufacture a Microsoft-powered smartphone (2002) and the first to produce an Android-powered smartphone (2008).
HTC made a mint during the days of Windows Mobile 5 & 6 as an Original Equipment Manufacturer (OEM), when they made devices for other companies to re-brand, such as “I-Mate’s Jam” which was a re-branded HTC “Magician” (HTC internal code-name).
In those days any of HTC’s devices could be re-branded to many names depending how many companies wanted to re-brand and sell them, for instance “Q-Tek” sold the HTC Magician under the name “Q-Tek S100″.
I-Mate also sold the HTC Magician under the name “I-Mate JAM”.
Even in the early years of HTC’s climb to record profits, before iOS and Android started taking over the world, HTC was making some of the best devices that covered the main low, mid and high budget bands that appeal to most people.
Later, it bought Asian device maker and distributor DOPOD, to become a fully fledged maker and distributer of devices under its own brand. Things were looking good for HTC as it grew with massive profits ranging from 50%-100% year-on-year.
During their years of raking in the money, they made several purchases of other companies to help expand and grow their competency beyond simply making the hardware we all enjoyed. When HTC hired design firm “One & Co” to design i’s “HTC Diamond”, it was such a success that HTC bought the design company outright to improve its future devices.
HTC made other aquisitions along the way to growing from being a mere maker of other companies’ devices. HTC bought a large stake in SyncTV, and later Saffron Digital, a media streaming service, and within months revealed “HTC Watch” as a means of customers buying and watching movies on their smartphones.
Later, HTC would invest $300 Million in “Beats by Dre” to buy a controlling stake in the company and by adding audio competency to HTC’s devices with both hardware and software.
HTC’s financial results for the last few years have been dramatic, to say the least. In a demonstration of having too much money and not enough creativity for how to invest it, HTC made some disastrous decisions, both creatively and financially.
Buying a design firm certainly was a very smart move for HTC, who needed to design competitive devices after its buyout of DOPD to become a fully fledged device maker. The other investments? Not so much.
HTC Watch never saw the light of day enough that anyone knows what it was, or know anyone that used it. It was badly advertised (read, it wasn’t), and HTC never capitalised on its investment even though it was one of the first to offer such a service on a smartphone. A clear example of reaching beyond their grasp. Having vision is one thing, but it needs execution competency to succeed, else it’s just fantasy struggling to become reality.
Money wasted then, but above all, a fine opportunity squandered by incompetence.
Next was the Beats acquisition, a cool $300 Million no less. What did HTC do with their investment? Well, HTC decided that, at first they would do exactly what everyone thought they should: put superior headphones with superior audio processing with every HTC device.
So far, so great, until….
HTC never advertised enough the advantage of Beats in smartphones, so customers never had a clue why to bother paying attention to the Beats logo or the bundled headphones.
Advertising should communicate to customer, creating desire emotionally and/or intellectually (preferably satisfying both), creating reasons why they should want the product. HTC never advertised their streaming movies ecosystem, and hence no one even knows about it because it’s not on every HTC device and not advertised at all. They never advertised Beats enough, so no one even had the option of choosing it.
To add insult to injury, barely 6 months later HTC decided to take the Beats headphones out of the box and put them on the shelves at retail stores. The idea was that consumers weren’t paying the premium for the Beats-bundled devices so obviously the consumers would by the cheaper devices without the headphones.
“An accessory like the headphone doesn’t factor in when someone is buying a smartphone,” Martin Fichter, an HTC product executive, told CNET. “If they want a Beats headphone, they’ll buy it directly.”
Fair enough, you might say, there’s at least a kind of logic behind HTC ‘s decision, but how would HTC sell the headphones they paid $300 Million for?
HTC would press the retail chains to train their staff better to push the customer to buy the headphones along with all the other accessories usually bought with devices.
HTC’s plan to get consumers buying HTC Beats-devices is to….push retail staff to sell headphones from the shelf? Brilliant, but why wouldn’t consumers buy a different device and simply add Beats headphones to that device instead? HTC didn’t seem to think this through while looking at their $300 Million receipt from Beats Audio. What to do?
Sell back half the controlling stake they initially bought back to Beats Audio of course.
It’s one thing to have trouble succeeding with your vision and purchases, but that’s not all that plagues the company. HTC sucks at advertising, and that’s if/when they do any advertising. Seriously, compare the amount of advertising HTC does with the likes of Samsung, Sony, et al and then wonder why Samsung is making piles of cash while HTC loses its shirt.
HTC decided that part of the problem was a lack of simplicity and cohesion with their branding, too many devices, not enough differentiation (although one could argue it never stopped Nokia in their hay-day from being successful). So HTC’s solution was was to cut down on the number of devices. Stop making ‘cheap phones’, and decide on a simple brand to try to emulate the success of Apple’s iPhone and Samsung’s “Galaxy” brands.
The “HTC One” series was born. So far so great, eh? If only.
HTC’s quality-control meant that some HTC ONE-X devices had Wi-Fi problems and even broke basic multi-tasking in Android 4′s Ice Cream Sandwich. This is not a great start to a new direction that HTC wants for it’s future.
Some people might ask where the HTC tablets are hiding? No one knows, the company can’t seem to advertise they’ve even made any.
How could a company that was doing so well, be doing so badly all of a sudden?
HTC is a company that started with notebooks, left that business to explode into smartphones, then failed in tablets and now seems stuck in smartphones. All that money it made years ago seems to not have been matched by vision and execution competency to invest that money to stimulate more growth.
HTC have had a turbulent financial history, looking anything but stable. they went from great profits to great loses very quickly, almost tick-tock‘ing chaotically. Just look at their stock-market value over the last few years.
- In Q2 2011 HTC profits were up 104% year-over-year and up 19% over the first quarter.
- In Q3 2011 HTC’s profit jumped 68%.
- In Q4 2011 HTC’s profits crashed 25% lower than the previous year.
- In Q1 2012 HTC’s profits were down again a staggering 70% over the previous year.
- In Q2 2012 HTC’s profits hit the skids again by 58%.
To add insult to injury, HTC, once the number 2 device maker in Asia, has now decided to pull out of South Korea entirely, barely a month after announcing similar “re-structuring” and pulling out of Brazil.This is not simply Samsung beating it on home turf, with added competition from other Korean stalwarts LG and Pantech, this is HTC making plans to restructure to survive a market it’s clearly having trouble understanding.
We’ve seen this in many companies, it’s a tactic to adapt to service. Some pull it off, others die despite their efforts. Companies like IBM had to re-invent themselves to survive, and thrived in their new identity as technology leaders, others like Nokia and RIM didn’t do enough before it was too late.
What will HTC do to survive, and will they be around next year to talk about it?