HTC loses $1 billion off its market cap in 2 days

August 8, 2012
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HTC’s financial results haven’t been kind to them lately, and neither has the media. All of HTC’s problems have been documented extensively lately, which, in turn leads to shareholders losing trust in the company’s ability to recover. However, this is the sort of thing a public tech company should expect.

Financial dry spells never happen suddenly, even if it may seem so when everything comes crashing down. But the seeds for HTC’s decline were planted a long time ago, at the time when the company started to care more about sales than for its products. This led to HTC churning out a ton of variations of every single phone, just to get a few extra customers. Innovation, something HTC used to be known for, was the collateral victim.

In a word, HTC got lazy. The phone maker also got careless about how it was spending the money earned during the “good times”, like with the failed investments in Beats Audio and S3 Graphics. That money would’ve been better used to research iconic phone designs and actually innovate.

Now, HTC is finally experiencing the outcome of those bad decisions. Their profit dropped by 58% in Q2 this year, compared to a year ago. Their sales dropped by 45% in July compared to the same period last year, and  Q3 is looking bleak. I wouldn’t bet on them recovering in Q4 either, seeing how the new iPhone will come out then.

“HTC’s weak third-quarter outlook means it will continue to lose market share and any market-share gains in China won’t likely offset its substantial loss in its key Europe and U.S. markets,” RBS analyst Wanli Wang told The Wall Street Journal.

Things like these don’t look good to investors at all, which is why HTC’s market capitalization lost $1 billion in value, only in the past two days. This means HTC’s shares have fallen by more than 50% this year. If HTC wants to recover, it better come out with something truly innovative, and then promote their new products heavily, all over the world, the way Samsung did with the Galaxy S3. It would also help if everyone could get the same HTC One X everywhere, instead of various versions; otherwise, it will be much harder for HTC to re-establish a strong phone brand.

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