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Opinion: For HTC, the only way is up

“We’ve been through hell, but we survived,” an executive told us during one of the company’s regular Frequencies meetups. But can HTCdo more than just survive? Can it thrive again?

Published onJanuary 24, 2015

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HTC’s story is one of ups and downs. Since its founding in 1997, the company made the jump from contract manufacturing (think today’s Hon Hai Technology Group (Foxconn)) to successfully selling devices under its own brand. In the 2000s, HTCquickly climbed to the top of the mobile industry, thanks in part to an early bet on Android. But the good times didn’t last – market share, profits, prestige… it all went away, and HTCfound itself struggling to stay relevant, pushed in a corner by Apple, and especially Samsung.

In the past two years, HTChas been as down as a company can be without closing down or selling out. “We’ve been through hell, but we survived,” an executive told us during one of the company’s regular Frequencies meetups. But can HTCdo more than just survive? Can it thrive again?

We’ve been through hell, but we survived”

If you believe HTC’s communication head Jeff Gordon, 2015 will be a great year for the Taiwanese company, thanks to the “best ever” product lineup and some “huge surprises.” Yes, 2014 was supposed to be a “positive” year too, and while cutting costs and increasing revenue in Q4 were positive developments, last year wasn’t what HTChad hoped for. With that said, 2015 shapes up to be different. March 1, the day the new One is set to launch, could be the day HTCbegins its symbolic comeback.

htc hima m9 invite
HTCis promising Utopia for its MWC 2015 event

On the financial side, HTCalready managed to stabilize by streamlining its portfolio, outsourcing some of its production, and other cost cutting measures. While painful, these measures allowed HTCto turn a (tiny) profit in the last three quarters of 2014. More importantly, after three years of falling revenue, HTCmanaged to increase its quarterly sales in Q4 2014. We’ll see if the trend continues in Q1 2015, but signs are positive.

Financial health is a reflection of a company’s product strength, and on this front as well, HTCseems to be going steady. The One flagship series isn’t a hot seller, but HTCseems to have carved a niche for itself, with its focus on design and premium build. Mind share is strong, and when people talk about attractive phones, the M8 comes up inevitably. Perhaps more important than the top of the line, the mid-range is strong as well. HTCcalls phones like the Desire Eye and the Desire 820 “premium mid-range” and it has a point – these are some of the best phones you can get without spending flagship money. And the strength extends down-range, even though HTChasn’t really tried to compete in the budget category.

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The HTCDesire Eye caters to the selfie lovers

More reasons to be optimistic are in the pipeline. Due at MWC in Barcelona, the One M9/Hima will bring a few tweaks to the series’ iconic design, and a big upgrade in a key area – camera. Multiple reports point toward a 20MP camera – HTCis done with the UltraPixel experiment and with the gimmicky depth sensor found on the M8. That’s great news – the inconsistent camera experience was one of the reasons the One (M8) only scored a special mention in our best Android smartphones roundup. The M9 shapes up to be a very well balanced device that combines premium design with solid specs and a refined software experience.

HTC is not just a phone company anymore

But HTCis not just a phone company anymore. There’s talk of a smartwatch (or at least a fitness band) launching along the M9 on March 1. If HTCmanages to apply some of its design prowess to the wearables category (where design is probably the #1 differentiator), it could have a hit on its hands. Also, at CES, the company talked about its ambition to connect all aspects of our lives, from our health to our homes. The whimsical Re camera is a step in that direction, though perhaps not the most promising one.

Then there are the tablets. The Nexus 9 isn’t a popular device, the way the affordable Nexus 7 was before it. But HTCprobably sees the Nexus 9 as a brand enhancer, rather than a moneymaker. HTCwill surely follow up with its own brand tablet, perhaps as soon as MWC. The tablet category isn’t growing explosively anymore, but for HTC, expanding in this area is still vital, after years of relying exclusively on phone sales.

To wrap up: a refined flagship; a solid mid-range; new tablets; new wearables; expansion beyond mobile; slowly improving financials. These are all reasons to be excited for HTCin 2015. What about the pitfalls?

The mobile landscape in 2015 is more competitive and complex than ever. HTCwas a victim of Samsung’s cutthroat tactics, but now the Korean giant is getting a taste of its own medicine from Xiaomi. Things are in flux, and that means both opportunity and danger for tiny HTC. Because odd as it may sound, HTCis a small player – with a 0.9% sales share, it ranked 16th in Strategy Analytics’ global tracker in Q3 2014, behind OPPO and vivo. It sold 25 times fewer phones than the leader, Samsung.

HTC’s slice of the market is thinner than ever

As a small fish in a large, crowded pond, HTCneeds to put out great devices, but it also has to convince buyers that its products are better than competitors from Apple, Samsung, Xiaomi, LG, Lenovo/Motorola, and countless others. That requires smart marketing (an area where HTCstruggled in the past, by its own admission), a flair for what consumers want, and the willingness to sacrifice profits. That’s clearly a challenge for a company that lacks the luxury of having a large, diversified group at its back, ready to support it with resources and money.

Turbulent as it may be, the current situation could give HTCthe chance to snatch back some of the market share it lost so quickly since 2011. Is it now or never? Nobody can say for sure, but it’s hard to imagine HTCsurviving for much longer without returning to real growth. Some voices are already calling for selling out to some cash-flush competitor hungry for international recognition. So, from that perspective, HTC’s only chance is to go up.