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The rise and fall of HTC

by Marty Gabel

HTC was one of the first developers to get aboard the Android train. When Google first launched its original operating system a few years ago, HTC were there. This weekend, we learned that HTC reported a significant loss in the final quarter of 2011 and offered guidance that things might not get any better.

Our very own Appolicious Advisor, Kristen Nicole, discussed HTC’s failings in a news article this morning, citing competition as part of the problem. She’s right of course. After all, Winston Yung, CFO of HTC, told investors in a conference call “Our weakness in first-quarter guidance ... comes from facing competition in the U.S. from iPhone and Samsung.”

In 2008, HTC built the very first commercially available Android smartphone called the HTC Dream. A couple of years later, they collaborated directly with Google to create the first ‘pure Android’ Nexus One device. And now, two years on, they’ve been overtaken by Samsung (and, to a lesser extent, Motorola). While HTC continues to make some money from their handsets, it’s clearly not as much as it used to be.

Is it the hardware?

Could this be part of HTC’s problem? The company has launched an awful lot of Android smartphones over the years, and while many of them have been warmly received, right now it’s sometimes hard to tell exactly what their flagship device is. It wasn’t always like this. The Droid Incredible I’ve owned for two years is still a great smartphone and was certainly at the top of its field at launch.

Even today, Engadget reported that HTC admitted that its “bulky, quick-dying LTE handsets kinda suck.” Publicity like that certainly isn’t going to help them, but there is no denying that HTC caught a lot of flak for the less-than-stellar battery life of the first Verizon LTE 4G device, the Thunderbolt. While some of these battery woes were resolved with software updates (and other non-HTC devices continue to display similar issues), it was HTC that got most of the bad press about this.

Does HTC launch too many phones? When a seemingly flagship device emerges (like the recent Rezound) there’s always another directly on the horizon (like the HTC Ville). Meanwhile, Samsung, with its more subtle variations on the Galaxy and Galaxy II line, continue to sell in their droves and create a clear brand identity. Motorola has its fair share of devices too, but it’s clear that its original ‘Droid’ brand and recent RAZR incarnation have captured the public’s imagination, despite the company’s similar disposition to release incremental updates of already existing devices.

Or is it the software?

HTC’s OS software skinning (known as Sense) may be an acquired taste for many users these days. But a couple of years ago, it was a little nicer and more functional than original, stock Android. Now that Ice Cream Sandwich has been unveiled and demonstrates that stock Android need no longer be an ugly duckling, I’m beginning to wonder about Sense and its necessity in the future. We’ve begun to see some evidence of Sense’s 4.0 skin that will sit on top of Ice Cream Sandwich, and frankly, it’s not been received too warmly. Many feel it’s killing the essence of Ice Cream Sandwich which Google worked hard to improve, especially UI-wise.

Software skinning alone is unlikely to be the factor that’s damaging HTC’s bottom line. It is a way that HTC differentiates its devices and a way for the company to make money. Samsung still has its TouchWiz skin running on most of its devices, and while it’s not loved by everyone, it is a little less obtrusive. However, Samsung is performing brilliantly right now, and selling millions of smartphones and tablets. Clearly the fact that it runs a software skin is almost moot. People are buying Samsung devices all over the world, and probably never even think about such things. It’s an Android phone, it works, it runs apps. Meanwhile, discussions of HTC often boil down to arguments about the relative merits of its software skinning, whether rightly or wrongly.

The future?

The company says it is looking to reverse recent failings, naturally. How are they going to do this? Well, they’re going to refresh their smartphone line up. Maybe they’ll release a killer handset to truly capture public imagination, but it’s clear they’ve got a lot of work to do to catch up with Samsung.

There have been rumors of an HTC Facebook phone for a while. Whether the social networking giant’s much-publicized IPO plans could nix such plans, it’s hard to say. With 425 million people using the Facebook sites via mobile devices per day, this could be one area where HTC could see a huge upside. It will, however, have to be an impeccable device and marketed perfectly, and it will still come down to Facebook itself to choose which manufacturer gets to create such a smartphone (if at all).

After a fantastic 2010 which saw its share price triple, late 2011 saw the HTC hit the ground with a resounding thump as its share price slumped 42 percent. HTC’s situation isn’t truly dire just yet, but It will need to a better job differentiating itself from other successful smartphone manufacturers. As Google tightens relations with Motorola and Samsung still rules the roost, it could be a tough slog.