Before HTC was the aspirational brand fronted by Robert Downey Jr., which it presents itself as today, it was a humble white-label manufacturer of mobile devices for other more established companies in the consumer electronics space.
Far from today's producer of handsets with a distinctive (and controversial) branded ""chin," this HTC eschewed the limelight, content with establishing a name for itself in the background alone.
My own first exposure to the Taiwanese company was through PalmOS- and Windows Mobile-powered devices which it assembled for the likes of Handspring and Audiovox -- they were some of the most well-built, technologically-advanced products I'd ever owned.
Starting in 2006, HTC went through a transformation, wherein it shed its role as a faceless manufacturer and began designing its own smartphones, paying close attention to the brand image it was conveying to consumers. During the early years of the smartphone revolution, this ethos served the company well: In the third quarter of 2011, it was the top smartphone vendor in the U.S., beating out both Samsung and Apple domestically.
Consumer preferences are fickle, though, and phones are a particularly brutal and fast-moving vertical.
As the market for these devices grew, HTC stayed focused on the high-end -- ceding the rapidly-expanding, but less profitable, lower tiers to upstarts like China's Xiaomi. Only two years after reporting record profits, HTC found itself warning investors to brace themselves for its first quarterly loss as a public company.
And in the past two years, it has become a regular target of acquisition rumors, with the latest alleged buyer being Asus, another large Taiwanese company. HTC, for its part, says it's not interested in selling to Asus, although it didn't completely rule out the possibility of a buyout from other suitors.
How things change
The company was recently forced to warn investors of an impending weaker-than-expected quarter, threatening the fragile turnaround effort that seemed to be taking place. After the bad news, the market pushed HTC's Taipei-traded shares to their lowest level in ten years.
HTC stock drops to 2005 levels, nearly 50% down since M9 launch: http://t.co/CFD8cO2kCC— GSMArena.com (@gsmarena_com) June 11, 2015
Throughout its almost decade-long existence as a consumer-facing manufacturer, HTC has been adamant about maintaining its brand image -- even as it was getting squeezed between Apple and Samsung on the high-end and a slew of low-cost manufacturers on the more affordable end of the continuum.
In more profitable times, that brand awareness could be forgiven as an effective marketing strategy. But with the company on the ropes, continuing to ignore volume sales now smacks of hubris.
When your HTC One M9 store demo display can't even beat Samsung. pic.twitter.com/1fibfZsiOV— Droid Life (@droid_life) June 18, 2015
Things are going poorly for HTC. Very, very poorly http://t.co/PW3Q7g8ad2 #fail pic.twitter.com/mNKZplQWk4— Remote Control (@speedshareit) June 9, 2015
How's this cool?
In a recent interview with the Wall Street Journal's Digits blog, HTC's chief financial officer defended a strategy he acknowledged was controversial. After discounting the possibility of going the low-price, high-volume route. "Low-cost players care only about volume, but can they be seen as cool technology brands beyond smartphones?" said Chang Chia-lin. He added that "we think that’s the right strategy because we started as a high-end player, and there is still room to go in terms of being a sizable market-share player."
He went on to argue that "the flagship product would create a halo effect, drawing mid-tier and entry-level models along with it. Hopefully, the pie will grow and the mix will be healthy. It’s natural that revenue contribution is associated with brand perception, and that’s something we care about."
It's not the only time that HTC has come across as somewhat arrogant despite its waning fortunes. When Chairwoman Cher Wang added CEO to her responsibilities following Peter Chou's ouster earlier this year, she explained the rationale thusly, to Bloomberg: "I know the company, I know the people, and I have the vision. I think I am the best candidate. I suggested it.”
And prior to introducing this year's flagship, the One M9, to mixed reviews and tepid demand, the company's Senior Global Online Communications Manager, Jeff Gordon seemed overly optimistic.
HTC's 2015 roadmap will be our best ever--with some huge surprises that will blow you away. ;)— Jeff Gordon (@urbanstrata) December 31, 2014
I'm overwhelmingly excited for #TeamHTC in 2015! I can't wait to show you what we've been working on!— Jeff Gordon (@urbanstrata) December 31, 2014
Of course, there's nothing wrong with a company hyping its own product; in fact, employees would be remiss if they didn't put their best foot forward.
But what is problematic is ignoring the writing on the wall, maintaining that same swagger when all the world is fully cognizant of your struggles. It almost sounds like team HTC would rather fail looking cool than succeed by risking downmarket associations with its all-important brand image.
Hey, tread contritely
For now, the company's strategy seems to revolve around growing its non-smartphone revenue streams (such as the Re Camera and upcoming HTC Vive virtual reality headset), which currently contribute well less than 10% to the bottom line.
In other words, it'll gamble with that upmarket brand in untested categories, but won't offer the masses truly cheap alternatives to its high- and mid-tier lineup.
In fact, it's entirely possible that HTC's cost structures preclude competing on price, anyway: When you cultivate a polished brand image, you'll probably tend to foment a taste for luxury in your employees, leading to fixed labor costs that can't be supported by thin margins.
While it's true that HTC has had its share of bad luck over the last few years -- the Snapdragon 810's overheating debacle did nothing to bolster One M9 sales -- it also seems that the laurel-resting left it entirely unprepared for the cutthroat competition that has enveloped the rapidly-commoditizing smartphone space.
At this point it may be too late for HTC to recapture its once lofty position in the handset market. But if it is able to reinvent itself around an array of "connected lifestyle" products, it would do well to keep its head down and learn from the mistakes of the past.