Boxing heavyweight Mike Tyson once remarked that everyone has a plan — until they get punched in the mouth. So it is with smartphone makers. HTC’s strategy for dealing with the decline in its handset business is already on the ropes.
The Taiwan-based company’s phones were once über-cool. Now they are also-rans. On Thursday, shares tumbled more than 6 per cent after it released August revenue data. Sales were just T$3bn ($100m), less than half the level of the same month last year. There is precious little prospect of the company achieving the consensus sales forecast of T$20bn for the third quarter.
At best, the plan to focus on high-end handsets that compete with Samsung and Apple is not working quickly enough. At worst, it is not working at all. Meanwhile, Chinese newspapers are speculating that Google will whack HTC below the belt by hiring all its handset engineers.
So to Plan B. Every fading heavyweight has one: BlackBerry focused on software, Motorola Mobility sold itself and its patents to Google, Nokia threw its lot in with Microsoft. HTC’s comeback hope is virtual reality. Its Vive kit is highly rated by the sorts of people who spend hours with bulky headsets clamped over their nerd specs. But at $599 a time (even after a price cut), virtual reality is some way from achieving the kind of wider market acceptance that leads to non-virtual profitability.
Facebook, owner of the rival Oculus system, can afford to wait until it does. Market leader Sony can also tough it out. HTC would have to punch above its weight. True, it has T$22.8bn of net cash, so a knockout blow is not imminent. But it has been burning through the money at the rate of about T$2bn a quarter over the past three years. The company has reported a net loss every year since 2014.
HTC could throw in the towel on handsets by closing or selling the business. Or, more viably, it could float or sell a stake in Vive.
The clock is ticking. HTC’s share price is a 20th of its 2011 level. If HTC does not act, a long, debilitating loss on points beckons even if there is no haymaker to HTC’s jaw.
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