How To Collapse: do slumping sales and an executive exodus spell doom for HTC?

News out of Taiwan today is that HTC’s president of smartphone and connected devices business is resigning, effectively immediately. Chialin Chang, who’d previously served as HTC’s CFO and, between 2013 and 2017, its head of global sales, was one of the last remaining high-level executives not to have departed the company. But the position he was occupying started to look redundant after HTC sold off most of its smartphone design and engineering team to Google for $1.1 billion.

HTC hasn’t yet quit the smartphone business entirely, as the company has already promised a dual-camera flagship phone for 2018, which we can surmise is the U12 that was teased a couple of weeks ago. Sources familiar with HTC’s roadmap have told The Verge that the next major phone launch from the company won’t be at Mobile World Congress in Barcelona this month, but will come soon after. What, if anything, we can expect from HTC’s smartphone division after that point is unknown.

Each month for the past six months, HTC has recorded a double-digit decline in revenues relative to 2014. For a company that wasn't making all that much money in the first place, and whose most notable achievement in recent times has been to stabilize and break even last year, 2015 has been nothing short of a disaster. It is within this dire context of deflated momentum and negative growth that HTC has now decided to stop issuing forward guidance as part of its earnings reports.

Reporting revenue of $657 million for the third quarter of this year, down from nearly $1.3 billion the previous year, HTC declined to advise investors and financial reporters about its expectations for the fourth quarter. It has noted the launch of the new One A9 handset, which it hopes will revive sales in the most lucrative holiday season. But there are no projections about the expected impact of that device, or indeed, about the rest of HTC's lineup.

Of all the phone manufacturers in all the vast and diverse lands of Android, HTC was the last company I expected to see producing an iPhone clone. Like Nokia (the original one, not the hollowed-out husk that remains today), HTC has been a long-time innovator in smartphone design and engineering. Its habit is to lead, not follow. And yet, just over a week from now, HTC will unveil its next hero phone, expected to be called the Aero, and well… it looks like an iPhone.

Just 11 months after HTC's longtime chief of design, Scott Croyle, was revealed to be leaving the company, one of his former allies who stepped in to fill the void has also departed. HTC has confirmed that Jonah Becker has left the company, having previously served as its head of product design. Becker and Croyle joined HTC six years ago, when their design studio One & Co was acquired by the Taiwanese company.

"Oh, when I was a kid, I got no respect.
I played hide and seek.
They wouldn’t even look for me."

Like the late American comedian Rodney Dangerfield, HTC is a company suffering from a chronic lack of respect. The Taiwanese phone maker has a pedigree of mobile innovation rivaling that of Nokia and Apple, but last week it had to change its CEO amid ambivalent feedback to its latest smartphone and a struggle to generate consistent profits. There are many challenges for new CEO Cher Wang to overcome in the months ahead, but beside the technical issue of just building better cameras, probably the most critical among them will be to reestablish the company’s respectability.

On the brink of its biggest product launch of the year, HTC has delivered the unexpected news that it's appointing a new Chief Executive Officer. Peter Chou, who had filled the role since 2005 and led HTC's rise from an anonymous contract manufacturer to a global smartphone brand, is being replaced by company co-founder Cher Wang.

Wang immediately becomes the focal point of all decision making at HTC, taking responsibility for broad corporate strategy as well as final product decisions. This marks the formalization of a handover of power that began in 2013 when Chou was said to be temporarily offloading operational duties to Wang in order to focus his attention on product development. Now that he's being demoted, he can make heading up the new Future Development Lab his full-time occupation.

Peter Chou is out as CEO of HTC, and chairperson Cher Wang is his replacement. Chou will "transition to a strategic new role leading future product innovation" as head of HTC's Future Development Lab. Wang co-founded HTC in 1997, and in 2013 Chou handed her more of his CEO responsibilities in what was said to be a temporary move. She will also retain her chairperson position. "As an entrepreneur at heart, I am excited to see so many new opportunities, and I am honoured to accept this opportunity to help shape the next stage of HTC's development," Wang said in a statement.

Wang takes the reins at a period of transition for HTC: its last two flagship smartphones have failed to sell well despite general acclaim, the upcoming One M9 is an evolutionary change, and the company has started to diversify with devices like the unusual Re camera and the Vive VR headset in development with Valve. "We are seeing rapid changes in the industry, with the smartphone as our personal hub connecting us to a growing world of smart devices," reads Wang's statement. "We pioneered the smartphone industry; now we are applying that thinking to realize the potential of a new generation of connected products and services."

Smartphone maker HTC has recorded its first quarterly year-on-year sales and revenue growth in more than three years. The Taiwanese company rode new mid-range headsets and devices targeted at developing markets such as India to a sales rise of NT$5 billion ($156 million) year-on-year — sales rose to NT$47.9 billion ($1.5 billion) in the fourth quarter of 2014, up from the NT$42.9 billion ($1.34 billion) HTC posted in Q4 2013.

HTC has struggled to maintain a strong presence in the contested smartphone market in recent years, with slumping sales and an exodus of executives boding badly for the company's future. But by selling mid-range devices, HTC products have found a space between Apple's iPhone 6, Samsung's huge slate of smartphones, and cheaper handsets from fast-growing companies targeting developing markets, such as Xiaomi.

"The smartphone is just the overture of HTC’s grand opera."

Phones are now cheaply made commodities, and the company that makes them the sole focus of its business doesn’t survive long in the modern world. Motorola, Nokia, and Palm were all sold off to richer conglomerates, Sony Ericsson was reabsorbed into Sony, and BlackBerry is just hanging on by the resilient thread of its enterprise services. Until yesterday, HTC was the last holdout as an independent smartphone maker, but now it too is embracing the winds of inevitable change.

HTC CEO Peter Chou was in Tokyo today to unveil the company’s latest flagship smartphone for Japan, the new J Butterfly (HTL23) on KDDI. The phone has much in common with the excellent HTC One (M8) released in the rest of the world earlier this year: it features a 5-inch 1080p display, twin front-facing BoomSound speakers, a second camera lens to allow for Lytro-style refocusing after taking the shot (though the main sensor is 13 megapixels rather than the M8’s four-“ultrapixel” unit), and so on.

But the J Butterfly has a few tweaks that bring it in line with local expectations — it’s waterproof and dustproof, with features like a TV tuner, mobile wallet support, and infrared connectivity. It’s also housed in a plastic shell, rather than the M8’s sleek metal. HTC is emphasizing the quality of the glossy finishes, and the new J Butterfly does look quite attractive in person, but it definitely doesn’t feel as nice as its global counterpart.

This time last summer, Fred Liu and Ben Ho were still stepping up to higher ranks within HTC to fill the void left by departing top-level executives. Now, according to a Bloomberg report, they're emulating their predecessors by also resigning from their roles. Liu had been HTC's president of engineering and operations since replacing Matthew Costello in June 2013 whereas Ben Ho managed the company's marketing efforts since late 2012. Ho, in particular, has been prominent in communicating HTC's long-term plans to worried investors and analysts, and his job hasn't been made easy by a continuous exodus of high-ranking HTC officials.

Although Ho was placed in a tough situation by HTC's shrinking sales and protracted malaise, the company's greatest weakness during his tenure remained its marketing. Engadget adds to Bloomberg's information by noting that the failure of an expensive ad campaign featuring Robert Downey Jr. last year contributed to Ho's demise. Both Ho and Liu are expected to remain in their roles for a few more months, but the upheaval at HTC looks set to continue, having been resumed earlier this year by the unexpected departure of chief designer Scott Croyle in April.

It's been a long and trying year since HTC last reported a quarterly profit, but in Q2 of 2014 the Taiwanese phone maker has finally returned to making rather than losing money. The unaudited financials for the past three months show a modest profit of NT$2.26 billion ($75 million) off the back of NT$65 billion ($2.17 billion) in overall revenue. That's actually less than HTC generated in sales in the second quarter last year, however the net number is 80 percent higher owing to a series of cost-cutting measures undertaken by the company.

The new flagship Android phone from HTC, the One (M8), has been generally recognized as the best-designed and most attractive new handset to come out this year, and its presence will surely have helped to steady the company's financial fortunes. Still, it doesn't appear to have been the runaway success that HTC needs to feel fully confident about its long-term prosperity. Goldman Sachs research quoted by The Wall Street Journal forecasts that this second quarter will be HTC's peak, as it has been for the past two years, indicating that without another big release in the fall, HTC will continue to hover around the break-even mark.

Scott Croyle, the man responsible for the stellar designs of HTC's One smartphone line, is leaving the Taiwanese company. Having led HTC's industrial design and user experience teams since his One & Co studio was acquired in 2008, Croyle is now departing to work on his own projects. HTC confirmed Croyle's plans to The Verge, though the company describes the move as a "long-term transition" where he will remain involved with HTC product development in a consultancy role for a few months to come.

Croyle will occupy this transitional role while handing off his full set of responsibilities, the most important of which will be the development of next year's flagship HTC device. His second-in-command, Jonah Becker, is likely to take over most of his duties and step up to lead HTC's San Francisco studio. In a potentially related move, Drew Bamford has been promoted from overseeing the Sense user experience to being in charge of all HTC software and services. The company plans to simplify its internal structure by consolidating its user experience team much in the same that it did with its industrial design and engineering group.

HTC has hired Paul Golden, the chief marketing officer at Samsung US when its devices were becoming known as the "next big thing." Golden, whose LinkedIn page says he "created and launched the highly successful Galaxy brand," was at Samsung between 2008 and 2012, a time in which the Korean company rose to global prominence in the smartphone market. A lawyer for Samsung in the ongoing patent trial with Apple claimed its provocative "Next Big Thing" campaign drove its rival "crazy" after kicking off in 2011.

HTC on Friday confirmed the hiring The Verge, with a spokesperson providing the following statement: "HTC continues to invest in talent and recruitment as part of our broader human resources strategy to ensure the continued strength of our company's organizational structure." Bloomberg first reported the hire.

This time last year, HTC was under pressure as it was coming off the back of its lowest profits ever. Unfortunately, the passage of time hasn't altered the company's downward trajectory and today the Taiwanese phone maker is reporting a NT$1.88 billion ($62 million) loss for the first three months of 2014. That's the second time in three quarters that HTC has dipped into the red, having only broken even in Q4 2013.

HTC forewarned investors in its last earnings report to expect a losing start to the new year, but even its downbeat estimates weren't pessimistic enough. The company fell short of the expected NT$35 billion in sales, posting NT$33.12 billion, and disappointed analysts who had been predicting a narrower loss.

HTC's Q4 2013 financial numbers are out today and the company has suffered yet another decline in sales. Whereas the last quarter of 2012 returned NT$60 billion, the past year reached only NT$42.9 billion. That's a drop of 28 percent, which in US figures translates to going from roughly $2 billion to $1.4 billion. It has ultimately led to a narrow $10 million net profit, but the company's operations are clearly not in good order as the operating margin was a negative 3.7 percent. Worse news is yet to come for the opening of 2014, with HTC forecasting even lower revenue, somewhere in the region of NT$35 billion ($1.15 billion), and a net loss.

Company chair Cher Wang today told Reuters that HTC intends to develop a stronger mid- and low-end smartphone portfolio, comments which have been echoed by CEO Peter Chou in today's earnings release. Chou also reiterates a priority for the company that has now grown into a chronic issue by saying that "we are going to communicate better with consumers." If HTC is going to turn its fortunes around, that'll surely be an important first step, but any hopes for an imminent revival seem to have been dashed by today's downbeat numbers.

HTC will increase the number of midrange phones it offers in 2014, and sell them for a cheaper price than its current models. Chang Chia-Lin, the Taiwanese company's chief financial officer, said HTC would sell products in the $150 to $300 price range in both existing and developing markets. The move, HTC hopes, will reverse the downturn in fortunes it has suffered that has seen its global market share fall to just 2 percent, its stock price drop 80 percent, and its profits fall 83 percent in the second quarter of 2013 from the previous year.

HTC co-founder and chairperson Cher Wang, speaking to Reuters, said that the Taiwanese manufacturer's "problem" in 2013 was "concentrating on [its] flagship." Only two of HTC's phones available in the company's Chinese store retail for under $150: the price point with the highest growth in the country according to IDC. Twenty-one phones retail for more than $500. Wang said that by focusing on high-cost models — even if they were well received— led HTC to miss "a huge chunk of the mid-tier markets" in 2013.

HTC has again signalled its intention to enter the wearables market. Chairwoman Cher Wang told Bloomberg News that the Taiwanese company plans to release a wearable device by the holiday shopping season, following comments by CEO Peter Chou that the category is "critical" for HTC. "Many years ago we started looking at smartwatches and wearables, but we believe that we really have to solve the battery problems and the LCD light problems," said Wang. "These are customer-centric problems."

Despite HTC's troubles in recent years, with well-received phones such as the One failing to take off with consumers, CFO Chang Chialin says the company is "positive and optimistic about 2014 when compared to 2013." HTC plans to revamp its marketing this year, an area that Wang admits has not been a strong point despite a high-profile campaign featuring Robert Downey Jr. "To tell the truth, we never think marketing is that important — this is really not very good," says the chairwoman, pledging to be "smart" about how HTC spends its advertising budget.

Taiwanese smartphone maker HTC is having some serious financial troubles, and they don't appear to be getting much better. Three months ago, HTC reported its first quarterly loss in company history, and today it narrowly managed to avoid making that two losses in a row. Today, for the fourth quarter of 2013, HTC reported net profit of only NT$310 million (about $10.3 million) on revenue of NT$42.9 billion (about $1.4 billion). But that $10 million profit doesn't necessarily represent a change in the company's fortunes, because it counts the roughly $85 million one-time profit that the company made when it sold its last remaining shares of Beats Audio. According to Reuters, the Beats transaction would have been figured into the calculations for the fourth quarter.

HTC has seen a number of senior executives leave in recent months, but it's putting on a brave face in public. The company has denied reports that it shut down factories to save money. It also says that marketing is its biggest challenge and it recently ran a reportedly expensive ad campaign starring Robert Downey Jr.

Several HTC employees, including a senior executive, have been indicted in Taiwan for leaking company secrets, falsifying expenses, and taking kickbacks, reports The Wall Street Journal. Thomas Chien, HTC's vice president of product design, is alleged to have leaked upcoming smartphone interface designs to a partner who he planned to start a new business with. Along with five other HTC employees, Chien has reportedly also been charged for collectively receiving around 33.57 million New Taiwan dollars (US$1.12 million) by falsifying expenses and receiving kickbacks from suppliers. Three employees from unidentified suppliers of HTC have also been indicted.

Chien and the other HTC employees were first arrested in August regarding these charges. At the time, it was reported that the designs Chien leaked were of Sense 6.0, which would be an upcoming, unannounced version of HTC's Android software and interface. HTC's R&D director, Bill Wu, and design team senior manager, Justin Huang, were reported to be among the other five facing charges at the time of the initial report, but the Journal doesn't say specifically who else has been indicted beyond Chien right now. Should so many high-level employees be facing prosecution, it would certainly be bad news for HTC, which is dealing with slumping sales and several other executive departures already.

Following last month's unaudited disclosure that HTC had its first ever unprofitable quarter since going public, the company today confirmed it slumped to a $102 million loss for the third quarter of 2013. HTC co-founder and CEO Peter Chou says the company "delivered good progress" this quarter, adding that the launches of the mini and max versions of its HTC One flagship have filled gaps in its product line.

Chief Financial Officer Chia-Lin Chang also pointed out that the HTC One continues to outsell last year's equivalent smartphone, the HTC One X, and is expected to do so next quarter as well. The company also claims its expensive marketing campaign, which features actor Robert Downey Jr., has been a success, improving brand awareness in all markets it was run in.

After being unceremoniously dumped by Beats Audio in September and recording its first quarterly loss this month, HTC is finding itself having to downsize. A Reuters report this morning tells of the closure of "at least one" of HTC's four main handset manufacturing lines, reducing its production capacity by at least a fifth. This is said to be in direct response to the disappointing sales that have plagued HTC since the beginning of 2012, and the company's chief marketing officer, Ben Ho, concedes as much. He tells Reuters that "when you have less demand you work with less facilities to optimize your costs."

In comments made to The Verge, HTC refutes reports of any closures, asserting that "HTC is not shutting down nor does it have plans to sell any of its factory assets. HTC has a very strong balance sheet and will provide the latest financials in our upcoming earnings call to investors and the broader community." That earnings call is scheduled for November 5th.

HTC leaders Peter Chou and Cher Wang believe wearables are a "critical segment" for the company, but say HTC won't put out a gimmicky "version one" product. The comments came in a joint interview with the Financial Times. "[A smartwatch] has to meet a need, otherwise it’s just a gimmick or concept," says CEO Chou. The CEO, who is handing over some responsibilities to focus on new products, believes current smartwatches fall short as they aren't useful in "people's day-to-day lives," and that represents a big opportunity for HTC to release something better.

It's an opportunity HTC has already looked into: the company apparently worked on a smartwatch with Microsoft "several years ago." Although Chou doesn't go so far as to reveal any particular product in the works, he's very clear on the potential of smartwatches: "people laughed at us when we came out with the first smartphone... now everyone has a smartphone. I’m pretty sure wearables will be the same, but don’t judge from what is in the market [now]."

HTC's co-founder and chairwoman Cher Wang has increased her operational role at the company to lighten the load on CEO Peter Chou. "I have become very focused in the past couple of months. Before that I was too busy," said Chou to the Financial Times. "I took on too many things. I need to be more focused on innovation and [the] product portfolio." The move is said to be temporary.

Wang's expanded duties see her working six days a week, rather than two, and handling marketing, sales, and relationships with suppliers. Chou, meanwhile, will concentrate on future product development, and said that the company would see "a good result next year." HTC recently posted the first loss in its history as a public company, and late last year Chou reportedly pledged to resign as CEO if the One smartphone was not a success.