HTC sales drop 48% YoY, 12% in a month. Profits down by 78% . Can 8X and 8S Windows Phones save them?

HTC results continue to go down the crapper.

They have just issued the September and Q3 2012 numbers, and there’s absolutely nothing good about them.

September sales came in at $NT 21.1B ($721 million) compared to NT$24B in August. Full quarter revenues were NT$ 70.2B ($2.4B), after tax profits – $NT3.9B ($137M). This compares to revenue of 135.8B NT$ ($4.6B)/$NT18.7B ($639M) in profits a year ago, and $NT91B ($3.1B)/$NT7.4B ($252M) in June quarter.

HTC decline has accelerated again. Sales dropped 12% in just one month, 23% in 3 months and 48% in a year. Profits are now evaporating even faster – 47% decline in 3 months and down a whopping 79% in a year. One or two more quarters like this and HTC will join the crowd of money losing Android smartphone makers like Motorola, LG and Sony.

And it seems that a pattern is emerging to these HTC troubles. Their problems started a year ago, with the release and rapid ramp-up of iPhone 4S sales. First on 3 major U.S. carriers, then Europe and then, in Q1 2012, in China. It took HTC 5 months to steady the sales decline,but by March 2012 they did it.

Unfortunately that didn’t last long, and as soon as Samsung launched Galaxy S3, there was another sharp 16% drop in HTC’s monthly sales. And now, with iPhone 5 only available in 7 countries for most of September – another sharp 12% decline. I wonder what the new iPhone will do to HTC numbers, as its sales ramp up around the world.

HTC’s Android position remains untenable too. They couldn’t compete with Samsung Galaxies on the strength of HTC One line, and the small One X+ flagship update won’t help there much. They may have an 5” phablet on the way – but that category too is owned by Samsung.

The only thing HTC has left to slow sales decline in the short-term – are Windows Phones. They’ve announced a couple of interesting new models – 8X and 8S. There will be a huge marketing blitz from Microsoft to kick-start its Windows Phone 8 smartphone platform, in which HTC will be featured front and center. And the Taiwanese company said they have an impressive line-up of 150 carriers around the world, to push the new devices.

The only problem is – Windows Phone is not what you’d call a proven and successful platform. More like the opposite. And Microsoft has already tried to launch two iterations of it, throwing loads of marketing money at everyone, every time. Barely moved a needle so far. Why would this time be different?

Third time’s is the charm? Maybe. The conventional is wisdom says that it’s not until the third iteration of a major product, that Microsoft finally gets things right and starts catching up in the market. And Windows Phone 8 conveniently is the third iteration of the OS. So maybe people will finally start buying WP8 phones in droves. But I have to see to believe that.

And then, even if Windows Phone demand explodes – how much of that will be new sales to HTC? And how much will simply cannibalize their Android sales. Oh, and let’s not forget that while HTC is important partner to Microsoft, the Nokia partnership is still there.

Well, we’ll have to wait for HTC’s earnings conference call in a few weeks, to see what they expect from the Christmas holiday season. The iPhone will be widely shipping for more than a month by then. And most of the device contracts for Christmas should be in the bag. Which would make HTC’s Q4 earnings guidance a very interesting thing indeed.

Author: Stasys Bielinis

While I like to play with the latest gadgets, I am even more interested in broad technology trends. With mobile now taking over the world - following the latest technology news, looking for insights, sharing and discussing them with passionate audience - it's hard to imagine a better place for me to be. You can find me on Twitter as @UVStaska'

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  • Ricky Webb

    HTC seems to have fallen out of favor with the carriers. Samsung and Motorola are getting the mindshare because the carriers are spending their advertising dollars on Samsung and Motorola flagship products. I think I have an answer for why from my girlfriend’s experience. Their phones have too many defects and lead to excessive replacement cost for the carrier. My girlfriend had an Incredible which simply stopped charging because the USB connector came loose in regular usage. She replaced it with a Rezound which has bricked three times (replaced twice, magically turned back on a week later another) in four months. She doesn’t have nonstock ROMs on it, she hasn’t dropped or otherwise damaged it. My opinion of HTC from this is that their products are a POS.

  • FlopTech Engineering

    Re: “There will be a huge marketing blitz from Microsoft to kick-start its Windows Phone 8 smartphone platform, in which HTC will be featured front and center.”

    Shhhh. Don’t tell Nokia!

  • JohnDoey

    The cell phone market is coming to an end. Almost all phone makers are not profitable. HTC is one of only 2 traditional cell phone makers who still turns a profit (Samsung is the other.) Both are still alive because they managed to make their phones look like little computers, but they still have only basic Java applets like cell phones, and lack of OS updates like cell phones, and poor build quality like cell phones.

    It’s all computers from now on. It’s not going to be enough to have just a cell phone. Users need to have full-fledged native C/C++ apps to edit video, create presentations, and access all their computing from pocket or briefcase or wherever. Computing is the new calls.

    And the developing world is no place to hide. People who have zero computers in their lives need to trade their phone for a computer even more than people who own Macs or PC’s. It will come a little slower there, but when it hits, it will be App Store that will drive sales, because it has real PC-class apps, which you can use to run a whole business, create and edit video for broadcast, create and edit multichannel music and audio, create and edit world class office documents.

    The thing that is responsible for iPhone being such a game changer is that it is a small, cheap Mac, not an expensive phone. The game is changed. The only company that has started competing is Microsoft by porting NT to ARM, but it has not even shipped yet. Everything else is an obsolete cell phone or PDA system. There just isn’t enough Java code out there for a Java phone to go the distance against a pocket Mac running native C/C++ from Mac, Windows, DOS, Unix, game consoles, arcade systems.

  • JohnDoey

    There was also a huge marketing blitz for Windows Phone 7 and it did not sell.

  • JohnDoey

    Yeah, but Motorola is unprofitable, HTC soon will be, and no phone maker has ever come back from that. So that leaves Verizon buying from Samsung and Apple. Ultimately, Samsung will falter on software unless something changes dramatically for them. Maybe Windows 8, which is hilariously immature on ARM but at least supports PC class development like iPhone.

  • Ricky Webb

    The issue isn’t profitability to me. It’s industrial design and quality control. I wouldn’t recommend an HTC smartphone to someone with an early 2000s Nokia candy bar phone because at least that thing probably still charges. HTC is struggling because the carriers have bailed on them. I’d put far more money on Motorola turning a profit in the next 2-3 years than HTC’s market share or even profit share growing.

  • Walt French

    John, I wonder how you see this affecting the overall Android ecosystem.

    If Samsung is the only popular high-end Android brand, what incentive does Google have to do anything that TouchWiz will over-write? …and that none of the apps will bother to use, since the huge majority of customers are on older versions of Android?

    If anything, efforts to use more CPU cycles for smooth UI experiences could actually make things worse for the large number of low-cost Android phones.

  • KarlWa

    Well, they ported NT to ARM, but they didn’t take the Win32 API with it.

    Any Windows applications that run on ARM will have to be rewritten with this new hybrid Win32/.NET API. Any Windows applications already written for the existing Win32 API will not execute on an ARM device.

    Apple didn’t do that when they launched the iPhone: it used the same system frameworks as the Mac, so for lots of things all that was needed was a recompile. The high-level controls framework AppKit was replaced with a touch-centric UIKit, but you should expect to have to rewrite your app UI anyway in that kind of transition.

    That’s why the iPhone simulator is so fast – you’re actually running against the native OSX versions of frameworks like CoreAnimation or CoreImage. People say the iPad is a big iPhone; hah! The iPhone is just a re-skinned Mac. Some things (like the aforementioned CoreImage) were kept private until the hardware could cope better, but now it’s pretty much all there. That’s how you manage a platform transition.

  • Sofie Degraeve

    > Apple didn’t do that when they launched the iPhone: it used the same system frameworks as the Mac, so for lots of things all that was needed was a recompile.

    That’s an overstatement. Cocoa touch (the basic UI frameworks for iOS) is actually a bit different from Cocoa (the similar frameworks for MacOS). So a “recompile” is never enough; a fair bit of reengineering is needed.

    OTOH, it _is_ true that the basic idioms a the same, and that many concepts and naming conventions are entirely similar. So for someone familiar with MacOS X development, switching to iOS development is a breeze, and certain components port pretty easily.

  • Sam Shallenberger

    Kills me that I don’t know your twitter, I’d follow in a heartbeat. Well written. I’m @CashGap.

  • Billy Liar

    Samsung may as well purchase Android, or even ditch it completely and move to Windows OS, which runs rings around the fragmented and laggy Android.

  • Sasparilla2

    I find the distraction with iPhone for HTC sales hard to fathom. Android sales are growing much fast than iPhone sales (and a much larger share of the market) – Samsung is HTC’s real competitor and is just beating everyone else’s brains out in the Android market (Samsung is the only OEM that can also make virtually the entire phone from screens to CPU’s to DRAM – so maybe that really gives them an edge, besides the execution on the phones themselves). the medium term implications of Samsung continuing to do this (they drive all the other OEM’s out of the Android market) is not fun to contemplate.

  • jameskatt

    HTC needs to license Apple’s IP so that it can create unique smartphones of its own. Currently they are a commodity cell phone maker and are losing by doing so.

  • jameskatt

    iOS and Mac OS X are so similar an App developer created a multi-windowing app that acted like the Finder. Of course it wasn’t approved.

  • Space Gorilla

    What happens if Samsung decides to ditch Android? That could be the end of Android’s chances to evolve into a viable mobile computing platform.

  • Andre Richards

    Apple’s going to dominate mobile the same way they dominate computers. Oh yeah, I hear you all giggling about that. Sure, Windows has more market share, but Apple kicks butt compared to other PC makers. Apple continues making gains there while the others continue sinking thanks to the race to the bottom their competitors like Dell and HP engaged in for so many years. Samsung, HTC, Motorola, etc.–they’re all playing the same boneheaded game of cutting corners and cranking out cheap, disposable products that might grab some first-timers to the market and wow the Android faithful but will long-term fail to win people over. Samsung is still riding the wave, but it’s crashing. In many ways I feel sorry for Androids fans. Your OS–whether superior to iOS or not–is tied to a steady onslaught of crappy hardware and slash-and-burn OEMs trying to out-cheap each other.

  • Dan Andersen

    It’s true–Samsung has clearly found that the secret to winning in the phone market is to (superficially) imitate Apple. It’s a pity that markets not only allow but actually reward such behaviour. One would think that rational customers would see the self-interest in rewarding innovative rather than imitative products and companies…

  • kgelner

    Speaking as an actual iOS developer who has dabbled in Mac development too, I assure you that Cocoa Touch and Cocoa (for the Mac) are quite different and porting an app from one to the other is way more of a challenge than you make out.

    if it were easy almost every iOS app would also be on the Mac App Store. That is not the case.

    Making something that looks a like like Finder is a LOT different task than porting existing code.

  • Mike

    The hilarious thing is the loud, un-silenceable start up sound that used to play on my friend’s phone just as the words “quietly brilliant” appear. For that reason alone she was going to ditch HTC with her next phone.

  • Staska

    Google-Samsung relationship dynamics will be interesting to watch. They can’t thrive without one other. But they both do resent of how much they’ve become dependent on one another.

    I mean at least 50% of Android growth came from Samsung lately. But Samsung isn’t happy and publicly stated they want recreate software success along the lines of what they did in semis. And they do have Tizen brewing, not that that will produce results next year.

    On the other hand Sammy won Nexus smartphone stuff two years in a row, with crapish HW. Now Google got afraid of Sammy’s rise – so they opened Nexus to anyone who cares, including LG. And they still doo own Moto

    As I said – interesting dynamics

  • Staska

    Yeah, well, you may be right about Apple:

    But do not forget about industry cycles. And that what’s important and makes kings today, is a liability tomorrow

  • Staska

    Sorry. I already told that Microsoft is really pissed at them so its looking for other options 🙂

  • Staska

    Good Q. But won’t happen for at least 2 years. And a lot can happen in the meantime

  • Staska

    Interesting idea. Except that Apple doesn’t license its key IP since Jobs revoked Mac OS licenses back in the nineties

  • Staska

    Not fun to contemplate, but true. And it’s not just about components. Samsung has a marketing budget of $12.5B a year – about the same as all HTC’s revenues. They’ve also been in this business way longer and can launch Galaxy S3 on 270 carriers vs HTC’s 150. We’ve all seen the results this year.

    HTC has neither money, nor partners to compete. HTC’s growth explosion was fluke when Apple upended the industry, and carriers without one were looking for any alternative to iPhone. Now that they have lots of them, HTC is screwed

  • ikokkinos

    Yeah, that’s why the big screen phones (phablets) are the future, because who cares if your phone is a computer.
    What you want is the best internet on your phone and not much more, with a kick ass computer at home with loads of storage and remotely access that when you want to do computing.
    I only need one great computer and a way to access it, the phablet even makes tablets redundant.