Yo, HTC — you got problems. And Dr. Dre can't fix them

29 thoughts on “Yo, HTC — you got problems. And Dr. Dre can't fix them”

  1. Everybody keeps saying that HTC is paying MS $5 per phone for patents, and there is absolutely no proof of this. Yes, the two companies signed a deal, but no numbers were released. I’m not convinced any money changed hands, as I think HTC agreed to build Windows phones in exchange for not having to pay the license fees. So unless somebody has some corroborated proof that HTC is paying that widely quoted $5 per phone, please stop repeating it.

    HTC makes good phones, and as long as they continue to do that, they will be competitive with Samsung and Motorola. But I agree, that Beats wont’ do much for them.

      1. Neither MS nor HTC has said how much HTC is paying, or what the terms of the licensing deal are, but after it was announced, one report said HTC “could” be paying $5 per phone. That possibility has been repeated as fact by every website reporting on the android patent issues. I don’t believe it. I don’t think HTC would give up so easily, when the patents in question are not that strong. MS needs hardware vendors to sell WP devices, and I think they got HTC to agree to build X number of WP models, possibly with a good license fee to MS. But I don’t see them so readily agreeing to pay the licensing fee to MS without a battle.

        I want proof because I don’t believe it’s true.

      2. So because some blogger states that he “speculates” that HTC is paying MS and it gets repeated so much that people drop the “speculation” and take it as fact we are to believe it?

        From my understanding HTC had to sign an NDA just like everyone else entering these deals with MS so no one knows how much they are paying if anything at all. Its been “speculated” as well that no money changes hands in these deals and the whole point of the NDA is to spread the idea that Android/Linux are infringing on IP when they aren’t. The deals may likely go something like “sign this NDA and play along or watch the licensing costs on your MS products go up along with audits”. Much easier to sign the deal then isn’t it? But that speculation doesn’t get repeated because it undermines the whole protection scheme.

  2. HTC makes great phones and their Sense UI is far better than Samsung. I think they should create a market for their product accessories rather than using beats brand (over rated headphone in my opinion).

    Samsung is also in trouble with Apple blocking their new Galaxy Tab products all over the world starting in Europe.

  3. If the aim is to simply be more present in smartphones, then yes, I’d think that this acquisition in light of their other moves, is a bit of a problem. However, I think – and I’m being generous here – I think that HTC sees what Apple knows, what MS realized, and what Nokia built but couldn’t execute on – smarpthones are a step towards the type of lifestyle computing where quality of the experience matters not as a device, but as the brand(s) have something worth holding onto. Right now HTC doesn’t have anything except “Sense” as something to hold onto. And that’s not even a card they care for (at least given their perspective on boot loaders).

    What seems to be the case with this move is that HTC wants to move itself closer to the other “senses” of the mobile experience – probably even making a branding transition into some kind of “Beats-themed” makeover (not just a lineup as was said in the announcement). At such a move, HTC could become a bit more of a consumer-noticeable brand that doesn’t carry the “geek” cachet to it and actually evokes a feeling besides “comes with carrier approval.”

    I think that’s their aim. I hope… because otherwise it is like you say Om, their in trouble and it won’t be a slow fall.

    1. I just got the HTC sensation and the *sole* reason to choose it over Galaxy II S was Sense! I agree that the next frontier is not hardware but UI…

  4. If they can get kids to pay as much for a Beats Smartphone as they do for those Beats Headphones, there’s a revenue bump that pays for the deal. Doesn’t solve their long term problem, but certainly re-energizes marketing.

  5. HTC bought Beats for HTC Listen, HTC’s answer to Itunes and is expected to be released next month. HTC already have HTC Watch, and now they are going to have HTC Listen and HTC Read. Obviously, HTC Watch for movies, HTC Listen for musics, and HTC Read for books.

  6. Well said! Too often now what starts out as speculation or opinion ends up being turned around and reported as fact. But wait, if we read it on the big world wide web “It’s got to be true”. HTC-got problems? Absolutely! Second quarter revenue up 63% over last year. Second quarter “profit” US$ 268 million after taxes. I have a hard time believing that HTC will not be a major player in the smartphone busines for quite some time.

  7. I’ve been watching Huawei, and the kind of phones they’ve been releasing lately. They seem to be higher and higher quality, and they remind me of how HTC has risen from just an OEM for others, to becoming a very successful brand themselves. I think Huawei will follow a similar path.

  8. HTC is slowly, but quietly doing what many others are doing… building the Mich vaunted “ecosystem” … or… at least they are trying to.

    One of those long tails to Apple profits is things like accessories. While this aqusition may not directly improve their phone sales, it certainly does have the potential to vastly improve profits while building their brand further, and that is the most important thing, right? I mean, that is what I hear in every Apple story (since Android surpassed them in marketshare anyway)… who cares what the marketshare is, they command the most in profits.

    In the end, so what if how HTC is executing their strategy is not clear to everyone else… if they are executing and continuing to increase profits, then are they really failing because they haven’t made their strategy obvious enough?

    They have come from being a “white box” builder to a recognized and valued premium brand in a relatively short time.

  9. HTC is now doing what Apple has been doing for years, but is now capitalizing on… patents. Apple can’t innovate anymore so they are buying patents and have started a patent trolling crusade. It’s no longer about what you create, it’s about how big your patent portfolio is.

    Someone else had it right.. patent trolling is the new monopoly. Apple has found great ways of being a monopoly without being pulled into anti-competitive battles in court. Very smart.. very as$holish though.

  10. HTC’s agreement with Microsoft is also patent protection. They get under the MS umbrella, and Patent Troll attempts from Apple, Motorola and Samsung can’t touch them, because those other IP holders need MS patents too.
    HTC is in a good position was a hanger on of Microsoft, I think.

  11. How can you say that in 2010 HTC had minimal competition in only Motorola then a few sentences later show that Samsung sold even more handsets than HTC in the same year?

    This article sounds like you needed to convince us that HTC is in trouble. Where they need help is building an ecosystem to compete with the likes of Apple, Amazon, and upcoming HP. They’re already making moves on that front too with the developer initiative they’ve taken.

    1. Samsung was selling different type of smartphones including Microsoft and Bada phones. Their full assault on Android market started in the second half of 2010.

      As for your part two of your comment, what I am trying to point out is that they have a lot more competition and it is not going to be as easy for them going forward. I do agree they need to help build an ecosystem but can they? That is much tougher than most think.

  12. so some random blogger on a site ive never heard of thinks HTC is in trouble because they purchased beats ? he’s obviously an iphone fan and a samsuck fan as well, so of course hes beating up on HTC, the only handset maker that has the quality to beat both of them. HTC is just fine, if you really want to show “stock performance” it should be noted that the drop in the stock could be because of bad economics or at the very least the ongoing patent battles. for the record samsung should stick to making TV’s , their mobile devices are continuously bug filled, and boring. i might someday buy a samsung TV(only if SONY stop making awesome ones) but i would never buy a phone made by samsung…speculation and opinion from someone with a clear preference for something else, is biased at best.

  13. First of all of course, past performance does not predict future performance. Since the launch of Android, HTC’s rise has been quite remarkable, but it was a long time coming as its “Quietly Brilliant” strategy of developing phones and moving up the ecosystem food chain over a decade has helped HTC become I believe Taiwan’s first true global brand (I’d bet more people recognize HTC than Acer…)

    I too am somewhat perplexed about HTC’s purchase of Beats Electronics. Maybe they are trying to differentiate their hardware with an excellent audio experience. I wonder what HP thinks of this acquisition, since HP has lately been promoting Beats in their PC’s and laptops.

    Samsung has been in the cell phone business longer than HTC and its rise in the 21st century has been equally if not more amazing than HTC’s and has become the Sony of Korea – and by most accounts, surpassing Sony at least in appeal and execution in most categories. Their broad consumer electronics portfolio in HDTV’s, cell phones, computers, as well as appliances (refrigerators, etc.) certainly will keep Samsung in the smartphone business for a long time. I don’t see HTC surpassing Samsung ever. But that doesn’t mean Samsung will crush HTC. Samsung could crush a less nimble Motorola, Nokia, Sony Ericsson, etc. first.

    As for China, you of course know that HTC is a Taiwanese company. The China market is currently mostly feature phones and certainly Huawei and ZTE will play a substantial role in their domestic market. But do you really think there is no room for other players. Who do you think will execute better in China? Except for perhaps Samsung due to its brand and broad consumer electronics portfolio, do you really think Nokia, Motorola, LG will out execute HTC in China?

    There are 1 million Taiwanese currently working in China right now, and I think HTC will be able to do just fine in the Greater China market. Peter Chou is considered the “Steve Jobs” of Taiwan and HTC attracts the best and brightest of the Taiwanese. (At a recent BBQ, I met a former Microsoft Windows Phone engineer who worked with HTC and was amazed and wondered how the hell HTC did some of the things they did on Windows Phone). Think about how complicated the Chinese market is and which companies will be able to navigate the complicated business and government environment and relationships there.

    As for royalty payments – I have to agree that unless other evidence is shown, if there is actually money being exchanged from HTC to Microsoft for actual royalties without any marketing dollars kickback or other compensatory benefits, I would be shocked. I wouldn’t be surprised what HTC pays to Microsoft in licensing fees will be cheaper than having to pay for lawyers or for settling for lawsuits. There’s a mutual beneficial arrangement between Microsoft and HTC, and there is a deep level of trust and respect at the executive level between Steve Ballmer and Peter Chou.

    The patent issue for HTC is real. Its acquisition of S3 and the initial favorable ruling by ITC for HTC vs. Apple on this matter is encouraging for HTC, but of course, this whole mobile wireless patent mess is not just specific to HTC. Whether or not HTC can partner with both Google and Microsoft to protect itself will be seen. But just look at this week’s EU injunction of Samsung’s Galaxy Tab in Europe. No one is immune.

    The departure of Howard Luke of course is troubling – any time a key executive leaves a company, that is always a concern. We’ll have to see if his departure indeed signified that things at HTC started to go wrong. But I think that is too early to tell. Buying S3 for its patents is confounding? Your hyperlink to the GigaOM blog post makes it seem it made sense. Is this your professional legal Intellectual Property opinion that this acquisition did not make sense?

    Usually a stock buyback is an indicator that a company is fairly confident that the company is undervalued.

    This blog post seems like something you decided to write just because you didn’t know what exactly to think about the Beat Electronics – which I agree, I’m kind of confused. But I think a lot of your other conclusions are much more speculative, but I guess that is what a blogger is supposed to do – speculate. Thought I’d give my two cents. Maybe my Taiwanese heritage pride is masking any rational thought, but I thought HTC needed to be defended against your post!

  14. This is why they need to not license webOS, but BEG HP to be acquired. To me, HTC makes great hardware, and would benefit from being able to focus on one platform, which I feel is the best platform, and help HP get some notoriety from a an experienced mobile hardware provider like HTC. They got the Palm IP. Combined with the likely turn-key integration with HTC’s hardware exploits, webOS could realize a great deal of growth.

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