In the wake of another disappointing quarterly earnings announcement from Apple Inc. (NASDAQ:AAPL), struggling smart phone developers HTC have announced a 70% drop in profits in the three months from January 2012.
HTC’s CEO Peter Chou was insistent in blaming the release of Apple Inc. (NASDAQ:AAPL)’s new iPhone 4S as the cause of his company’s misfortune. According to a statement given to Reuters earlier this week, HTC’s American market has completely bottomed out – a market that until recently accounted for over half of HTC’s total revenue.
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Chou was pessimistic about HTC’s immediate chances of regaining their lost American territories but insists that HTC will be “reborn” in 2012. Chou must be crossing his fingers that he is right – HTC simply cannot afford to sustain such losses in a smart phone market many analysts suggest is already approaching saturation.
HTC hopes it can regain some ground lost to both Apple and Samsung with the “HTC One”, the new generation of HTC smart phone. HTC claims the new model features improved camera and audio technology that gives it the technological edge over its rivals. However, it is not just the smart phone buying public who need to be convinced. HTC’s investors are understandably shaken by the recent losses and not all have been bought over by Chou’s rhetoric of “rebirth”.
Brave New World?
Temporarily surrendering their position in the West, HTC are looking to the booming Chinese smart phone market as their salvation in the coming months. Here however, it will again find itself in a head to head collision with Apple – a struggle in which HTC came out on the losing side when played out in America.
Apple is currently expanding in China at a furious rate. The first three months of 2012 saw iPhone sales at five times the level they were this time a year ago. Clearly HTC has a serious charm offensive on its hands in order to wean the Chinese away from their new found allegiance. It isn’t just the doom mongers who suggest HTC may be deluding itself in expecting too much from the Chinese market.
Where HTC may have reason for optimism is in partnerships with internet moguls Google Inc (NASDAQ:GOOG) and Facebook, both of which have expressed serious interest in moving into the smart phone market.
A report published in Taiwanese techie journal “Digitimes” suggests that Google Inc (NASDAQ:GOOG) is planning to break its alliance with Samsung in order to develop a new generation Nexus smart phone in collaboration with HTC.
At the same time HTC has allegedly signed a development deal with Facebook to develop a smart phone attuned to Facebook’s social networking services. Facebook hope to time the release to coincide with their impending stock market floatation – and are expecting big things from the market.
If this turns out to be true, then Peter Chou’s poker faced assurances to HTC investors may not be too far off the mark.