Is HTC a sinking ship? Resignations, poor sales, and absent leadership suggest so

May 22, 2013
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It has been difficult to know exactly what to make of HTC recently. The company has been touting success with the One, and is turning decent profits after months of underperforming, but today we learned that HTC’s Chief Product Officer, Kouji Kodera, left the company last week, and that the smartphone manufacturer is facing a bout of resignations.

It appears that, under the surface, HTC has been struggling with discontent employees for quite a while. In the past three months or so, HTC has lost of number of key employees to some of its competitors. After months of frustration, some of the company’s internal problems are being aired publicly, with one source suggesting that:

Anyone who's heard of them in Seattle doesn't want to go work for them right now… They're in utter freefall.

Whilst another ex-employee took to twitter to advise others remaining at HTC to get out:

To all my friends still @HTC - just quit. Leave now. It’s tough to do, but you’ll be so much happier, I swear.

These departures have mainly taken place in the company’s marketing departments; global retail marketing manager Rebecca Rowland, director of digital marketing John Starkweather, and product strategy manager Eric Lin each choosing to jump ship in the past few weeks. Interestingly, the US based hardware and software design teams have been relatively unaffected, suggesting that there’s plenty of work happily being done on individual product development. The frustration may be setting in when it comes to creating a coherent marketing and sales strategy for the company.

A lack of leadership

A few other sources have suggested that many of the company’s issues stem from problems at the top. Some believe have the new CMO Ben Ho has caused a stir by moving some of the company’s planning and strategy departments from the current base in Seattle back to HTC’s headquarters in Taipei. Others are pointing the finger at Peter Chou, HTC’s co-founder and CEO, who has failed to make a long term plan for the company, instead opting to take snap decisions when it comes to deciding the company’s future.

Whilst specific handsets have been selling quite well, mainly the One, HTC lacks a broader vision for products which appeal to consumers in quite the same way. The company just isn’t pushing the boundaries with interesting products, like some of its competitors. It’s essentially being propped up by the occasional decent product, and even at that the One isn’t shifting close to as many units world wide as Samsung’s Galaxy S4, which sold 10 million units in a single month.

HTC Monthly Revenue April 2013

Revenues have clearly been boosted by the HTC One, but a lack of other products is costing the company money in the long term.

The problem with HTC, in my opinion, is that it’s a company which doesn’t do anything to stand out, it’s constantly standing in someone else’s shadow. HTC dabbles in a few products, taking on Samsung with top of the line smartphones, sharing Windows Phone with Nokia, and producing a selection of mid-range handsets that are neither particularly budget nor hardware orientated, but the company no longer has a unique edge in the market.

Taking a closer look at the product line-ups of HTC and Samsung, Samsung has a range of very unique products like the Galaxy Ace, Note, and Tab, as well as a strong flagship smartphone, which are all considered top products in their respective categories. Compare this with HTC’s range of handsets which are, for the most part, somewhat similar and rather undefined. Other than by slight changes in specs and the price tag, and you can start to see where HTC’s business plan is going wrong.

Furthermore, risky devices like the First, which we’ll talk about more in a minute, are again signs of a business which is struggling for original and market breaking ideas.

Component shortages

But there seems to be more trouble at the top of the company than just a lack of a defined vision. There’s also a problem with communication. You’ve no doubt heard about the component shortages which plagued the launch of the HTC One, and it turns out Chou knew about the possibility of severe delays months ahead of the One’s release.

HTC staff is said to have alerted Chou to the issue months in advance, but they were told to push ahead with the product, most likely to at least put the One out ahead of the Galaxy S4, even if the handset’s availability would be affected. It’s difficult to know whether or not this was the correct decision, as it’s impossible to tell whether HTC would have been better served by waiting to launch the One after the Galaxy S4 or not.  The One’s launch was clearly hindered, but sales are apparently gaining some strength now that these issues are sorted out.

The HTC First debacle

The Facebook Home powered First was always a divisive produce when it was first announced back in April, with many writing it off almost immediately. To me, it seemed like a spur of the moment product who’s fate would ultimately be tied to the quality of a third party piece of software, which doesn’t sound like a particularly well thought out business idea.

htc-first-front-2

At the very least, the First was always a bit of a risky product, but according to those briefed on the plans things should have worked out a little differently.

Facebook originally intended to launch a downloadable version of Facebook Home after the release of the First, to offer HTC time to sell an exclusive product. Unfortunately for HTC, nothing was set in stone and Facebook instead decided to launch its Home software at the same time as the First, which no doubt decimated the handset’s sales figures. Surely it would have been a rational business proposition for HTC to draw up a binding contract before agreeing to manufacture the phone.

The handset has seen dreary sales since its launch. With a dramatic price cut from $99 to just one cent on contract, and a rumoured discontinuation, it’s clear already that the product is a failure. One source simply called the handset a “disaster”, and I think you’ll find it hard to disagree.

What’s next?

As for the future of HTC, it’s rather unclear. Financially, the company looks relatively stable for now, but there doesn’t appear to be a strong sense of direction for future products, judging by the disastrous First. Disgruntled employees and a lack of a long term vision are sure to stifle the company’s performance over the rest of the year, and with HTC already sitting in a precarious position, it’s tough to see how the company plans to maintain its much needed recovery.

Although its devices are selling relatively well, no-one can claim that HTC is close to being a top dog in the smartphone world anymore, despite the high quality of its handsets, and that’s just one of HTC’s worries. With a history of poor market performance, increasingly dominant competitors, and a staff struggling to maintain faith in their own company, it’s hard to see HTC making a recovery any time soon. Perhaps it’s time for a change in management and some fresh perspective.

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