Everyone has grown accustomed to disappointing financial results from the telecoms industry as the global economic outlook remains weak.
Announcing quarterly figures can feel like a harsh verdict, especially when major companies report declines.
Huawei reported robust sales of CNY 102.7bn (£10.4bn) for the first half of 2012, surpassing Swedish rival Ericsson in revenue over the same period.
Despite strong top-line performance, Huawei’s operating profit fell 22%. Chief Financial Officer Meng Wanzhou described the company as only “relatively optimistic” about prospects for the remainder of the year.
ZTE, another major Chinese vendor involved in the EU anti-dumping controversy, fared worse. The company warned that first-half 2012 profits could drop by as much as 80%.
Taiwanese smartphone maker HTC posted similarly disappointing results for its second quarter, announced in July.
The company disclosed total revenue of NT$91 billion (£1.93bn), operating income of NT$8.2bn (£174.2m) and net income after tax of NT$7.4bn (£157.2m).
Those numbers missed analyst expectations—operating income forecasts were around NT$94bn—and represented a sharp fall from last year’s earnings of NT$17.52bn.
A leaked memo from CEO Peter Chou, reported by the Wall Street Journal, indicated Chou believed HTC had expanded too quickly over the previous two years. He warned that rapid growth was beginning to hurt the company and that some executives were acting “without decision, strategic direction or a sense of urgency.”
On the developer front, HTC faced criticism over its kernel source code release policy. A petition on Change.org, featuring an image of an HTC handset labeled “quietly failing” in contrast to the company’s “quietly brilliant” slogan, urged HTC to speed up release of kernel source code. Developers praised HTC for providing unlock codes but argued that waiting up to 120 days for source code was unacceptable.
How does HTC plan to recover?
According to the Wall Street Journal, HTC’s head of China operations, Ray Yam, aims to capture an additional 2–3% of the Chinese smartphone market. That gain would help HTC compete more effectively with local rivals such as ZTE and Huawei, as well as global giants Apple and Samsung. Currently, HTC sits around ninth in Chinese smartphone market share.
Targeting China makes strategic sense given HTC’s recent struggles in Europe and the United States, where tougher economic conditions have weighed on sales. China represents a vast opportunity: carriers like China Mobile serve tens of millions of users, and demand for smartphones remains strong.
HTC is expanding its physical presence in China, planning to increase branded retail counters from 2,700 to 3,500 by the end of 2013. While that expansion is notable, it still trails Samsung’s approximately 6,000 counters.
CEO Peter Chou has expressed disappointment that HTC’s sales fell even as the smartphone market overall continues to grow. The company’s path to recovery will require faster execution, clearer strategic direction, and stronger competitive positioning in key markets such as China.
Whether HTC can reverse its recent performance depends on how quickly it adjusts its product strategy, improves developer relations, and expands effectively in high-growth regions while managing costs and leadership decisions.