HTC investors flee to the hills

Taiwanese maker’s cap drops by more than half this year

Following in the footsteps of RIM and Nokia, Taiwan’s HTC is the latest phone maker to hit the decks with its shares sinking to a new low and knocking around $1 billion off its market value. Failure to fend off Samsung and Apple is, again, the reason. Whereas just two years ago HTC was riding the crest of the wave as the first to make handsets powered by Google’s Android OS, it is now witnessesing a reversal of fortunes with its second-quarter revenues down by over a quarter and indications of more trouble ahead, including an expected halving of its revenues in the current quarter.Investors, not surprisingly, have headed for the hills – their exodus resulting in the company’s value dropping by more than half this year alone.

The company’s share price closed yesterday [7th August 2012] at 240.50 Taiwan dollars ($8.04) on the Taiwan Stock Exchange.

But whereas both RIM and Nokia have been able to use their corporate muscle through heavy distribution and marketing of new models, simultaneously slashing prices on older handsets, the issue is whether HTC can follow suit.

It’s estimated, for instance, that Samsung spends about six times more than HTC supporting sales while Apple spends nearly four times as much as HTC.

As a consequence the Taiwanese manufactuer has seen its market share slump in the past twelve months as Samsung rolled out its Galaxy line of smartphones based on Android and Apple’s iPhone 4S sold further abroad.

According to IDC, HTC’s share of the global smartphone market peaked in the second quarter of 2011, reaching 10.7 per cent. Now its share stands at just 2.2 per cent.

Meanwhile sales of its flagship One Series smartphones, on which it was pinning its hopes, have failed to take off since their launch in April this year.

Unlike Samsung, HTC has also so far resisted investors pleas for the company to venture into lower-end smartphones with CEO Peter Chou claiming that to do so would “destroy” its premium brand image.

Instead the company plans to try and increase its presence in emerging markets such as China and India in order to redress its sales decline.

See also HTC set to lose out to Samsung says YouGov and ZTE break into ranks of Top 5 smartphone producers.

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