At the start of 2011 it seemed as though Taiwanese smartphone-maker HTC was gearing up to make a strong run in the smartphone market, but after posting its fifth straight quarter of declining net profit, the company's future now appears to be in serious jeopardy.
After hitting the market in the U.S. in 2006, HTC smartphones made a strong entry, but the gains that it made have all but eroded. Fourth quarter profit was down 91% from the same period last year, and is now at levels not seen since 2006.
Revenues were down a whopping 41% versus the same three months last year, and it cautioned that its first quarter would be another challenging one.
The biggest, and most obvious, threat to HTC is Apple (AAPL) but over the last year Samsung has done the real damage. Not only is Samsung's Galaxy 3 smartphone finding success against the iPhone, it is gobbling up the Android competition as well.
According to research firm IDC, HTC had a 10.3% share of the global smartphone market in the third quarter 2011, but that share took a steep hit over the last year, falling all the way to just 4% as of the third quarter 2012.
In contrast, Samsung and Apple continue to dominate with the market, with market shares of 31.3% and 15.0% respectively.
Perhaps the biggest problem with HTC is that it is seriously lacking a flagship phone to drive traffic. Samsung has the Galaxy 3, and Apple has the iPhone, but what does HTC offer? They did launch a new phone, called Butterfly, late last year, but it has yet to make the impact the company hoped to see.
Another reason for HTC to worry is the recent acquisition of Motorola by Google. Immediately after the acquisition Google told its partners, including HTC, that Android would remain an “equal opportunity platform,” but recently we have seen reports that it will be making a phone with Motorola this year, putting it in direct competition with HTC. With Google running the show, Motorola is applying a lot of pressure to the rest of the field.
For HTC the end is not here yet, but it definitely has its work cut out for it if it wants to avoid falling into oblivion.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors. Follow him on Twitter at @MFatMICenter.