HTC Corp. is looking to capitalize on trends?and possibly buck them-as it works to deliver smart phones in the United States and around the world.
With 80 percent of the global Windows Mobile business, the Taiwanese smart-phone vendor has grown rapidly by providing third parties and network operators with relatively inexpensive smart phones that can be customized and rebranded as the carrier’s own. HTC Chief Executive Officer Peter Chou recently projected that the share of HTC’s $2 billion annual revenue might drop in Europe this year from 60 percent to 40 percent, but that Asia would hold steady at 30 percent and the U.S. market would triple from 10 percent to 30 percent.
Smart-phone sales numbers are relatively small-in the United States they account for about 4 percent of all handset shipments, and worldwide about 7 percent-but are growing at a pace to sustain the interest of most handset players.
HTC’s business model-in which it serves its carrier partners’ desire to rebrand its handsets-is in effect in the United States, where all four tier-one carriers sell its products. Cingular Wireless L.L.C. recently launched the HTC-built Cingular 3125, a small, stylish $150 flip smart phone with an alphanumeric rather than QWERTY keypad. In the United States, Windows Mobile is popular with enterprise users and consumers-a key trend in HTC’s favor-and thus HTC’s partnering with Windows Mobile vendor Microsoft Inc. has proven beneficial.
Overseas, HTC apparently has outgrown its role as an original design manufacturer (ODM) and has increasingly pursued a brand identity of its own as an original equipment manufacturer (OEM), not unlike other ODMs that yearn for the attention and profits that accrue to OEM brands.
Meanwhile, back in the States, HTC has landed in a market suddenly sought by a number of unforgiving competitors. Research In Motion Ltd. recently launched its BlackBerry Pearl model-a slim productivity handset with multimedia functions controllable by RIM’s enterprise customers-at T-Mobile USA Inc. for $150. Cingular Wireless is on deck to follow suit. Nokia Corp. last month brought out its E62 slim, QWERTY device to Cingular, its strongest carrier partner. Motorola Inc. had already drawn attention to its smart-phone plans with the Moto Q this past spring, a CDMA play at Verizon Wireless that at $200 sought to grab market share from RIM and Palm Inc.’s Treo devices.
The trend here is to pack these smart phones-originally conceived as productivity devices-full of consumer-oriented multimedia, style them slim and light to tap a broader market, and get them into the carriers’ retail sales channels, where most handsets are sold. The other trend, obviously, is to get the price point down to a level that the American consumer, dopey from handset subsidies, will step up to.
HTC appears to be tacking well, with these trends filling its sail, and that has bolstered HTC’s confidence.
At CTIA’s Wireless I.T. & Entertainment show, Todd Achilles, president of HTC America, made pointed remarks at the Smart Phone Summit about his wares relative to the competition on stage with him and drew a few chuckles for his chutzpah.
Expanding line
In a recent interview, however, Achilles initially soft-pedaled the competitive threat to his company’s prospects, and suggested that in the future HTC would develop handsets that would fit in a line extending from smart phones and PDAs to laptop computers. Extending a line from the Cingular 3125 non-QWERTY flip phone to a handheld with near-laptop speeds, memory, battery life and screen resolution (if not size) would be a broad portfolio indeed, and perhaps would buck the trend competitors are following of delivering smart phones that appeal more to consumers.
Achilles called attention to HTC’s flagship product here-a Pocket PC with a sliding keyboard-which sells as the Cingular 8125, as the T-Mobile MDA, at Sprint Nextel Corp. as the PPC 6700 and at Verizon Wireless as the XV 6700.
“I don’t think we get enough credit for that design,” Achilles said. “That’s a breakthrough.”
Achilles said that with the carrier retail channel ruling in the United States, there’s little need to distinguish between the enterprise market and consumers. Just get the three critical factors for smart phones in the United States right-they are stylish form factor, usability and price, he said-and there’s plenty of business for every vendor in the market.
“I really don’t see (RIM, Nokia and Motorola) as competitors,” Achilles said, “because all of us combined are just beginning to scratch the surface of the potential for converged devices. We see a `rising tide’ effect as we all launch new handsets and bring more awareness to the category.”
Pushed to address the competition question more realistically-after all, rising tides can lift all boats, then dash some onto the rocks-Achilles revealed the chutzpah that grabbed his audience at CTIA.
“You do it by offering the best devices with the highest quality at the most competitive prices,” he said. “We’re the strongest in the converged device space.”
Perhaps, according to Avi Greengart, analyst with Current Analysis, but in the U.S. market carriers will have to clearly communicate to consumers the value proposition represented by smart phones in general and HTC in particular.
Despite tacking with apparent trends and bucking them where necessary, Achilles said that HTC will remain responsive and nimble.
“We’re not strictly a Windows Mobile company,” he said. “We’re looking at other OSs.”
“It’s a matter of trying to understand where this market goes and making HTC devices relevant to that space,” he said. “HTC’s focus is its strength. We are all about converged devices. We’ve got no aspirations to become the largest handset manufacturer in the world. We’re the small player in an industry dominated by giants. If we continue to focus, we have a great future.”
