In HTC, Apple and Samsung Claim Another Victim

The Taiwan-based public corporation announced:

HTC Corporation, a global leader in mobile innovation and design, today announces unaudited consolidated results for 3Q 2013. For the third quarter of 2013, total revenues reached NT$47.05 billion. Unaudited operating loss was NT$3.50 billion, net loss before tax was NT$2.97 billion, net loss after tax was NT$2.97 billion, and unaudited earnings per share after tax were -NT$3.58 based on 830,403 thousand weighted average number of shares.

HTC had a spectacular success with consumers which slightly pre-dated Samsung’s rise to dominance. It made founder and chairwoman Cher Wang an international business celebrity. Now, she would probably like to run and hide.

Investor belief in HTC triggered a run up in share price, which drove its value higher by 10 times from 2004 to 2011. It has lost almost all that gain. On its current trajectory, it could plunge back to the level of nine years ago.

What happened to HTC is simple, and mirrors the reasons that LG, BlackBerry Ltd. (NASDAQ: BBRY), Nokia Corp. (NASDAQ: NOK) and Google Inc.’s (NASDAQ: GOOG) Motorola have fallen on such hard times. The pressure from Apple came from its “first mover advantage,” as business school professors like to say. The iPhone was first available in 2007, and consumers immediately viewed it as the best handset in the world.

Samsung was intelligent to mimic the iPhone’s architecture. That decision has cost the South Korean company in several intellectual property suits. However, Samsung is one of the world’s largest companies — diversified and with a balance sheet replete with cash. Once Samsung created the Galaxy line, it used the project, and its marketing might, to elbow its way into a territory that seemed as if it would be Apple’s for years.

HTC may have had the most innovative smartphones in the market, at least with the exception of the iPhone. Its HTC One and Butterfly sold well, particularly for a company of HTC’s modest size. However, newer versions of the One and the new Desire line have done poorly. HTC does not have the distribution leverage or marketing budget to push its way back into the top tier of global smartphone sales. It has reached a place where innovation no longer matters. Samsung and Apple hold too much of the high ground.

HTC has been thrown onto the garbage heap. It might become a niche player in smartphones. Just as likely, it will not survive as a standalone company at all.