HTC, the handset maker synonymous for, well, nobody really knows anymore, has had a great deal of difficulty over the past six months. Their share of traffic in the mobile market has declined and, as of late their product offering has been lackluster, to say the least. Quarter one of 2012 was especially trying for the company. Net Income for the first quarter was in the vicinity of $150mm. Revenues were down a dreary 35 per cent year-over-year.

The plight of HTC can be attributed to numerous aspects of the mobile handset business. First and foremost, HTC is losing market share at an increasingly rapid pace. While most of their industry peers are not seeing any sort of swift gains, there is one big player who is causing pain amongst the rest of the industry; you guessed it, Apple.

In order to determine the actual level of market share HTC is losing as seen on our network, Chitika Insights conducted a study analyzing data from October 2011 through March 2012. During the span of our study, Apple’s market share grew from 46.84% to 76.88%, an increase of 64.13%. Such a positive gain cannot be reported for HTC. Over this same duration, HTC’s overall web traffic share fell from 18.22% to 7.28%, a decrease of 60.04%. This does not bode well for HTC.

Apple is not the only threat to HTC. There are a wide variety of other Android manufacturers vying for dominance in the marketplace. It seems as if HTC is afflicted with a lack of product differentiation. Other Android handset producers are able to differentiate themselves from their competition in some form; HTC has yet to accomplish such a feat. “You’re in a tough spot if you have to compete with Samsung on quality and Huawei on cost,” Avian Securities analyst, Matt Thornton was quoted as saying.

HTC Invests $420M Outside of Company

So, at the core, what is HTC’s problem? In the words of Jason Mackenzie, President of Global Sales and Markets, “We let the portfolio get away from us.” Later adding, “We were trying to do too many products in a short period of time.” When examining HTC’s track record for acquisitions and other company investment efforts, what he said seems to hold true.

Past investments include a $300 million stake in Dr. Dre’s Beats Electronics, producers of audio gear, $40 million in OnLive, a cloud computing startup, delivering high-end video games and software over the Internet. To continue with the trend of content accessibility companies, they invested in Saffron Digital, a streaming content company for $48.6 million. Dashwire, a company that supports consumers’ access to content on numerous devices, received an investment of $18.5 million. Lastly, for $13 million, HTC invested in Inquisitive Minds, which developed a mobile Web browser for children. To put all of this in perspective, over the past year HTC has invested north of $420 million in various companies. During this time their stock price (and certainly market share) have seen steady decreases.

While growing a company externally, via acquisitions and investments often proves fruitful, there needs to be some sort of focus on it’s primary business line. To just go ahead to try and alter the dynamics of the company, moreover, a product, through external changes does not seem to be working for HTC. They lack a sense of concentration in regards to their primary business line, mobile handsets. Being an interloper, it seems as if HTC has all of the right elements that when combined, will comprise an excellent product. Albeit, right now they need to focus on driving demand for the handsets themselves, then slowly add the accouterment.

What’s Next for HTC?

The truth hurts, but is there anything positive to say about HTC? Yes, in fact there is. With hindsight being 20/20, HTC CFO, Winston Yung, according to Bloomberg News, spoke of quarter four as being a missed opportunity in regards to new product launches. Examining the first quarter, Yung went on to simply call that a “transitional” period. Looking to the future, HTC has great potential. They have aligned themselves with great opportunities via investments in a diverse set of companies that can aid them in producing a blockbuster handset.

HTC must be persistent; this fight for market (traffic) share will not be an easy one. They face an uphill battle. Google purchased Motorola Mobility last year. This might be cause for concern as Google could limit access to Android upgrades. To keep customers happy, these upgrades are essential. On another front, HTC is engaged in legal battles with Apple over patent issues, not to mention the throngs of hardcore Apple brand loyalists.

All of the negative aside, HTC has recently released their One series. Thus far they have only introduced three international models; One X, One S and One V. Prices will range from $795, on the high end, for the X, while the least expensive of the trio, the V, is set at $397, a price point that falls at the higher end of the mid-range pricing spectrum. US models are rumored to be released around the end of April. All of the phones utilize Android 4.0, Ice Cream Sandwich.

The HTC One X is considered to be their new blockbuster handset. It has a 4.7-inch 720p Super LCD2 HD display (complete with Gorilla Glass), an 8-megapixel camera, and is capable of capturing 1080p video. To briefly touch on the hardware side of things, the X sports a Nvidia Tegra 4 processor. The 4-PLUS-1 configuration is utilized, giving the X’s CPU four performance cores and one companion core.

All in all, HTC has done well to position itself to succeed in the handset market. As of now, they are doing all that they can. Their fate relies heavily upon their competition and their imminent answer to the One Series.

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