HTC’s profits drop in half in the second quarter, Customs ban and weak sales blamed

by: LucianJuly 6, 2012
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HTC warned a few weeks ago that its Q2 earnings will not be that great, and it looks like they were right. HTC’s profit dropped by 57.8% in the last quarter, compared to a year ago. This means that more than half of their profit has evaporated, leaving the Taiwanese with only $250 million in profit for this quarter. In the meantime, Samsung achieved an amazing $5.9 billion in profit for their phone division, thanks mainly to the launch of the Galaxy S3, which increased their profits by 79%.

So why was Samsung so successful and why was HTC’s evolution so lackluster in the past quarter? HTC blames customs issues, referring to the injunction that the ITC imposed on the imports of the HTC One X. But I am not convinced that the week-long blockade of the One X and EVO 4G LTE is enough to explain the massive drop in profits.

HTC also puts the blame on weak European sales, and it’s a little hard to pinpoint the exact reason why this happened. Either HTC didn’t market the One X well enough in Europe, or perhaps everyone was expecting the Galaxy S3. Of course, Europe is in the midst of a debt crisis, and it’s possible that consumers are more apprehensive about spending their money on high-end devices (which is something that Samsung has suggested as well).

Regardless of the reasons of the recent sales slump, HTC needs to step up its game, both in terms of branding and innovation.

In branding, because, while Samsung was busy making a strong brand out of their flagship devices, the Galaxy S line, HTC was releasing a new “flagship” with a different name twice a year. At the same time, the Taiwanese kept launching other models, again with different names, some of which being just slight variations of their flagship devices. I’d say that hurt HTC a lot in the long term, because they couldn’t really create the kind of hype that Samsung created for the Galaxy S3 this year, and they had to start from scratch with the One X series.

While the One X has a beautiful design, and it’s definitely above the average smartphone released these days, compared to the Galaxy S3, it isn’t that spectacular, or at least it isn’t spectacular enough to beat the Galaxy S3 in sales. HTC’s Q2 earnings prove it. To get back in the game and start experiencing healthy sales and profits, HTC needs to release something amazing, that would overshadow anything that Samsung or Apple would come up with.

I don’t know what that amazing something could be, but I know HTC needs it, and I know that it’s not Sense 5.0. HTC is a hardware manufacturer, and they need to blow our minds with their manufacturing and design prowess, while also continuing to make powerful and competitive devices.

If HTC could also be one of the first companies to switch fully to stock Android, I’m certain it would give them the much needed buzz for their products. People might start to recommend HTC devices over anything else in the market, even if other devices have slightly better hardware.

  • saturnring

    The reasons I didn’t buy HTC are:
    1. The local telco didn’t come up with impressive package.
    2. The protruding camera lense is an eye sore to me.
    3. The device does not have external memory expansion.
    4. Battery should be at least 2000mAh.
    5. It lacks those SIII minor features.
    I must say the phone has a better front design than SIII and it’s a great phone.

    • Joe

      The protruding camera lense in my opinion gives it a more futuristic look and the design is better the whole S3 is an outdated looking eyesore. Plus you don’t get beats audio with the S3.

  • Nila

    Have to fully disagree.
    HTC Sense is actually very nice and one of the few reasons I have stuck to HTC in the past.
    I am a ‘power user’ thanks before anyone starts thinking “n00b!” or any such other pointless thought process. I have a custom ROM and tinker with the phone regularly and always stick to the Sense ROM’s.

    I am about to finally ditch HTC though and move to Samsung because HTC just repeatedly keeps doing deal breakers for their phone that just make it constantly miss the mark no matter what else they put in the phone:
    Earlier HTC Phones:
    Not enough internal memory so EVERYONE I know constantly ran into problems when installing apps where they would run out of space even AFTER using app2sd.

    HTC ONE:
    1. Fixed Internal Battery – Deal Breaker, Yes Apple did it and got away with it, you’re not apple with a bunch of stupid users
    2. Fixed Memory – Whole reason I like Android is I can upgrade memory and swap phones etc as easily as I want. I bought a 32Gb SD card for my current phone and I’d like to keep using it in the next one thanks – so glad you decided I should just chuck it away and stick to the measly amount of memory you chose to give me – no cloud backup is not the same – I dont want stream everything I do, especially on the underground.
    3. The battery is far from amazing – learn from Motorola and put in a big fat juicy battery at the cost of 1mm extra thickness then market the hell out of the fact your phone actually lasts for a while.

    Yes they are all deal breakers.
    If it wasn’t for those 3 my next phone would have been a HTC again but thanks to them, Samsung gets my cash and their profits keep going up.
    HTC Seem to have a bunch of marketing guys making all their decisions as there seems NO logic to them.

    • SamsaraGuru

      Couldn’t agree with you more Nila.

      Instead of wasting time on designers who are more interested in appearance over actual, honest-to-God functionality, HTC should have thought to themselves, “What qualities would make a phone desirable to both people who really know their stuff about smartphones as well as people who simply want to enjoy an effortless experienced powered by more power than they will probably use, but at least will mean they won’t need a new phone in six months.

      Let’s make a phone that actually lasts an entire day and into the night and let’s make it so that if our battery should die – simply because it is defective – they don’t have to send the whole bloomin thing back to the factory!

      Let’s use our heads and think before we make it so that our version of “memory management” of the 1G we put in the HTC One X doesn’t have to close down apps to help fool the world into thinking that it actually has a decent battery and battery life.

      But no – that would take too much time; too much money and we don’t have the time to waste or the money to spend on such things; we have to get the product “our there”.

      Well, guess we don’t have to ask them “How’s that workin’ for you?”

    • Joe

      1. Nothing wrong with a fixed battery it makes it more resistant to water/dust which in turn offers a more solid construction than the S3 or phones with removable back cover.
      2. Again nothing wrong with fixed memory 16gb + dropbox storage is enough unless your on the piratebay all day downloading music/movies.
      3. Again nothing wrong with the battery I get by all day with moderate/heavy use on my One X.

      The S3 screen is terrible when compared to One X the brightness makes it unusable in bright sunlight. The S3 has a bunch of gimmicks such as s voice while the One X is all business.

      • Needspeed64

        1. and 3. I agree with you because I am not a heavy user, so the battery should get by the whole day without problem for me. But for power user, this is a big no.
        2. is a big problem for me. I have limited data plan, so I can’t stream music all day (that will kill the battery also). I want to access my data without having to worry about data plan and wireless connection all the time.

        But the most important thing is, Samsung Galaxy S3 offer me both of those option at the same price as the HTC One X.

        People choose Android because it offers them OPTIONS. People who decides to spend $600 on a top tier Android phone want these options. We can argue all day long on this topic, but the sales number speak for itself.

  • John Stock

    And slow releases of the latest Android. My Desire S will get ICS AFTER some phones already have Jelly Bean. How ridiculous is that?

  • Benmartin1974

    I just got my HTC One X and this review helped me make up my mind, glad I got it, best phone ive had so far./

  • zam9999

    It’s all abt marketing otherwise ono x is the best in the market

  • Sammy Joe

    I own HTC one X, I think is the best smartphone so far. I tried Xperia ,Blackberry in the past, but nothing close to HTC one X. Samsung simply has more money to throw for advertising and promotion, but I choose HTC One X anytime compare with Samsung GS3.