3 min read

HTC Losing Smartphone War One Quarter At A Time

Despite making some of the best smartphones available, HTC struggles to gain market share against Apple and Samsung.
HTC reported its third quarter earnings Monday, which saw a precipitous drop in profits. It managed to eke out a profit of $133 million, but that figure is 79% lower than what HTC earned in the year-ago quarter. It's also significantly lower than the $253 million that HTC earned during the second quarter. HTC had predicted the sales drop, but analysts and investors were expecting earnings to be $190 million, so HTC missed badly.

HTC doesn't provide specifics on device sales, so the number of phones it sold during the third quarter isn't known with any degree of certainty. Suffice it to say, HTC didn't sell enough.

HTC debuted the Titan II, One X, One S, One V, and Droid Incredible II between January and April. All of these devices were available in the U.S. by May or June. The One Series (X, S, and V) in particular are some of the best phones HTC has ever made. The design, manufacturing, specs, and performance are all there. So why aren't consumers biting?

Two reasons: Apple and Samsung.

Apple and Samsung already own the lion's share of profits in the smartphone space, and they own the lion's share of sales, as well. The Galaxy S III reached five U.S. carriers in June and July, and Samsung announced in September that it had sold 20 million of them worldwide. T-Mobile recently announced that the Galaxy S III is its all-time bestseller. Samsung sold 58 million smartphones in its most recent quarter.

[ What should you expect if the proposed merger between T-Mobile-MetroPCS goes through? Read What T-Mobile, MetroPCS Merger Means For Business. ]

Apple's iPhone 5 went on sale September 21 and saw sales of more than 5 million in the first few days. To say that demand for the device was high would be an understatement.

Late last year, HTC renounced the low-end smartphone market, suggesting it would be beneath them to make cheap phones. That decision may have been a costly one. With no down-market devices, it essentially gave the entry-level smartphone market to competitors Samsung, Huawei, ZTE, and others.

Although HTC brought a number of mid- to high-end devices to market by mid-year, it didn't introduce any new products in July or August, and the phones it announced in September won't reach store shelves until November. Even then, analysts aren't holding out hope.

"The new models we saw in the past few weeks are not going to change the game. It will be able to keep its market share, but we won't see much pick-up," said Yuanta Securities analyst Dennis Chan via email to Reuters.

HTC's new devices are decent. The One X+ is a significant upgrade to the One X, and the VX is (again) one of the best phones I've seen from HTC. The Windows Phone 8X and 8S are also solid entries, but they will go head-to-head with Nokia's Lumia 920 and 820. There's no doubt the market is competitive, and HTC's third quarter numbers show just how difficult it is to win at this game.

Download the debut issue of InformationWeek's Must Reads, a compendium of our best recent coverage on enterprise mobility in our new easy-to-read and -navigate Web format. Included in this issue of Must Reads: 6 keys to a flexible mobile device management strategy; why you need an enterprise app store; and Google points to the future of mobile. (Free registration required.)