Analyst: HTC may consider a merger with Huawei

July 15, 2013
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    htc one google play edition aa back profile

    We’ve covered a fair bit of HTC’s recent ups and downs, including, financial troubles, staff resignations, and, of course, the launch of some quality products as well. But as much as we might love the HTC One, you can’t help but notice that the wider company is grossly under performing when it comes to the financial aspects of its business.

    HTC recently missed its second quarter operating margin of between 2.5 and 3 percent, managing only 1.5 percent, despite the launch of its new flagship One. This caused a further sell of the company’s stock, and led many investment firms to downgrade their expectations for HTC’s results for the remainder of the year.

    In an attempt to escape from this seemingly desperate situation, an analyst from JP Morgan Securities Ltd said yesterday that HTC Corp could consider a merger with the Chinese manufacturer Huawei, just to survive in the ultra-competitive smartphone market.

    With a hero product (the new HTC One) unable to turn its prospects around, the other game changer could be a merger
    Alvin Kwock

    A potential merger between the two companies could leave the newly formed business with the fourth largest share of the smartphone market. According to research conducted by Gartnet Inc, Huawei holds just under a 3 percent share of the global smartphone market, as of Q1 2013, making it the sixth largest manufacturer in the world. Despite the launch of the One, HTC is still languishing behind with less than 2 percent of the global smartphone market, leaving the company in 13th place.

    A merger would immediately leave the new company with around a 5 percent share of the global market, leapfrogging LG Electronics, currently sitting on a 3.7 percent share, and ZTE, 3.4 percent, into fourth place. However, the newly formed company would still be behind Apple, 9 percent, and Nokia, 14.8 percent, and a long way behind the market leader Samsung, which currently holds 23.6 percent of the entire smartphone market.

    But market share isn’t the only benefit to be had from a merger, the two companies could combine their strengths in order to be much more competitive. We know that HTC is capable of producing products with outstanding quality, and Huawei has managed to break the competitive but lucrative Chinese market. Between them, there’s a potential threat to the other major players in the smartphone industry.

    Combining Huawei’s China expertise with a brand that has a superior product and consumer experience could boost future growth for the company by bringing complementary expertise in-house,
    Alvin Kwock

    So essentially, HTC would finally have access to a market with sufficiently strong demand to make the company sustainable. And Huawei seems like the most likely contender, and the company best placed in the Chinese market, to make this happen.

    Of course, this is the musing of just one analyst, and we have no idea if this idea has even occurred to HTC or Huawei yet, let alone been discussed. But a merger is an interesting prospect for both consumers and the wider industry, and it could be HTC’s ticket out of its current dilemma, if it’s upcoming products fail to improve the company’s fortunes.

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    Comments

    • Mike Bastable

      Robert, this would be interesting but do mainland China and Taiwanese companies merger in this way? It would be a good sign if they did.
      I think that HTC should actually cut costs, continue to innovate and spend spare money on PR….the products (when focused) are good butthe marketing has always been attrocious.

      • fredh

        yeah I also curious with this China – Taiwanese company merger.
        tho I think it will be impossible.

        • OMGgary

          The big problem with this merger is they would spend more time arguing about whether the PRC owned Taiwan, or Taiwan owned the PRC, than they would spend making phones.

    • Jarl

      How about the rumors of huawei acquiring Nokia?
      How about a htc-huawei-nokia merger? :)

      • Lisandro O Oocks

        Yeah! They need to make up their mind!

      • OMGgary

        I dunno name could be kinda weird. Would you buy a HuaTockia?

    • Raaj

      Unless HTC continues to maintain its individuality after the merger, the brand will die an even more painful death. Huawei’s name doesn’t do rounds in the “premium” segment. That is exactly where HTC is hoping to create a niche for itself, though failing horribly. Of course, Huawei could acquire HTC and still continue to churn out HTC branded premium phones – a la Toyota – Lexus style.

      But I really don’t see that happening either because HTC is not that premium and Huawei after a multi million dollar deal allow HTC as a brand to make phones better than what Huawei can. It still looks like a painful death for HTC.

      And your point of HTC and Huawei joining forces to capture market share numbers won’t work. Because if at all the merger does happen, once people know that HTC and Huawei coming out under the same roof, people will either buy an HTC or a Huawei, based on their needs and not both. The numbers aren’t going to add up collectively and help the merged company leap frog LG!

      • Goldstar

        LG G2 & LG Nexus 5 will win the competition……

        • Raaj

          I hope they do!

      • crackinthewall

        Probably because premium products deserve premium support and let’s face it, HTC’s aftersales support is far from premium.

        • Raaj

          One of their major disappointments.. YES!

    • Luka Mlinar

      I got the sense HTC was doing bad for the last year or so. They might not have a choice.

      • smokebomb

        Ha you got the “sense” ;-)

        • Luka Mlinar

          small pun intended ;)

    • GeeKLoRD

      In my opinion, they should just fire Peter Chou and hire a new CEO.
      Look how well that has worked for Sony!

      • RaptorOO7

        That hasn’t done anything for BlackBerry so its not a given. What they needed was cash to market their HTC One and not make it so complicated to manufacturer which would have allowed a timely launch.

    • smokebomb

      Pretty misleading headline.

    • ryq24

      It wil start out as a merger but in the long run, Hwawei will just bought out HTC!

    • John-Phillip Saayman

      Apple 9 percent, Nokia 14%, is that correct way around. Isn’t apple second?

    • Grman Rodriguez

      HuaweiTC

    • Cristi13

      Are these the same anal-ysts that said that huwaei will buy Nokia, that s4 doesn’t sell, that wp will dominate the market few years after release? Seriously unrealistic and stupid predictions/expectations.

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