HTC cuts revenue forecasts amidst slumping Android sales

Thu, Dec 1, 2011


A few weeks ago, NPD released US marketshare data indicating that the iPhone 4 and iPhone 3GS were the most popular smartphones during the third quarter of 2011. So while Android devices may cumulatively sell more than Apple, it’s quite telling that even a 2+ year old product such as the iPhone 3GS is able to sell more units than any other Android handset out there.

Consequently, while Apple has brand recognition and engenders product loyalty, the same can’t be said for Android manufacturers.

Which brings us to HTC. In his biography of Steve Jobs, Walter Isaacson notes that he had never seen Jobs as angry as he was when HTC released their first iPhone-esque Android device in 2009. For some time, HTC was the premium Android handset manufacturer, prompting some shortsighted analysts to boldly declare that HTC’s future prospects were looking brighter than Apple’s.

And while iPhone sales continue to grow, HTC’s smartphone sales have stopped accelerating, prompting the company to lower its revenue forecasts by 23%. HTC attributed its bleaker than expected outlook to the broader economic environment along with fierce competition from Apple and the latest Android darling on the block – Samsung.

HTC’s Desire, Sensation and Wildfire models have lost ground to Apple Inc’s iPhones and Samsung Electronics’ Galaxy line-up, prompting calls for a change of tack in a fast-moving and fickle market.

In his first response to a battering from stock markets — HTC shares are down more than 30 percent in just nine trading days — Chief Financial Officer Winston Yung told Reuters on Monday that HTC is not another Nokia, the Finnish mobile firm that experienced a rapid fall from market dominance as nimbler rivals overtook its stolid product line-ups.

“I don’t think it’s so serious,” he said, noting that even the most conservative guidance is for shipments to increase to 45 million units this year, from 25 million last year.

And therein lies the problem for Android manufacturers – they need to rely on sheer volume to make a profit. Whereas Apple’s iPhone margins are healthy on account of fat subsidies from carriers, Android manufacturers need heavy volume to make a profit. And while those profits can be enormous, Android as a brand supersedes any branding from individual Android manufacturers. Android user’s aren’t particularly tied to an HTC smartphone anymroe than they are to an Android device from LG or Samsung. They’ll flock to whoever has the latest and greatest device. Maybe it was HTC 2 years ago, and maybe today it’s Motorola and Samsung. As for tomorrow? Who’s to say, but rest assured that the iPhone will still be at the top of consumers wish lists no matter which Android competitor has the product de’jure.

In the end, this works out great for Google as its Android OS continues to proliferate, but over time, it might result in handset manufacturers shying away from Android on account of immense competition and perhaps turning their sights on other platforms like Windows Phone 7.

Its industrial design hasn’t changed for almost two years. Unless it launches a really different phone, it’s hard to sell the product at a premium price,” said Roxy Wong, analyst at Mirae Asset Management in Hong Kong.

“HTC lacks an edge in branding against Apple and Samsung. It has stronger hardware specs against Apple, but not Samsung. It takes time for a company to enhance branding, so the room left for HTC to improve sales is not much unless it starts cutting prices.”

Funny, Apple has rarely changed the industrial design of the iPhone and they seem to be doing just fine.

via Reuters


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