This article is more than 1 year old

HTC takes a gamble with new brand and OS strategy

Sidelines Microsoft

Even in the US, where the carriers' brands are paramount, manufacturers are starting to bypass them and sell highly branded products through retail outlets or through alternative service providers (Nokia's increasing investment in selling phones through its own stores or other channels was one factor, no doubt, in its new success at AT&T, which would rather tame the dragon than compete with it.)

And a succession of 'big hit' handsets have strengthened the vendors' brands and showed that the handset makers still understand device marketing as the operators do not. As well as undertaking clever handset launches, such as that of the iconic Motorola RAZR, the phonemakers are increasingly harnessing the power of more generic consumer brands - the hugely successful use by Sony Ericsson of Sony brands such as Walkman and CyberShot; the extension of the Apple iPod phenomenon to the iPhone; and so on.

The renewed strength of handset players seems to be luring HTC to seize some of that power for itself, propelling itself into the higher margins that well branded smartphones carry compared to white label products, and aiming for greater bargaining power with carriers. It recently announced its first true own-branded smartphone and is to acquire its nine Dopod International subsidiaries to strengthen its presence in Asian markets and unify the logos.

Peter Chou, HTC's CEO, commented: "Well performing brands enjoy strong awareness amongst consumers so it is extremely important for HTC to enhance brand recognition by communicating a consistent global brand image. In the future, HTC will provide consumers with consistent global marketing services under the HTC brand name."

Yet HTC is in serious danger of overreaching itself here, and reducing its dependence on Microsoft too abruptly. With $2bn in total annual revenues, it is relatively small in the handset market, though it dominates Windows Mobile, and seems not to have noticed that phone sales are increasingly concentrated on just five majors - Nokia, Motorola, Samsung, Sony Ericsson and LG - whose overall share is rising as other rivals give way to the weight of price pressures and consolidation. Alcatel and Siemens are just two former top 10 players that have quit the game, recognizing that they lacked the scale to play a major role.

And the main reason why HTC has punched so far above its weight, particularly in the US and Europe, has been because of its decision to provide well designed and priced Windows smartphones with only the operator brand, appealing to carriers and making itself indispensable to Microsoft.

While it may have some success in pushing its own products in Asia - though it will face competition from a welter of struggling second tier players such as NEC, Fujitsu and Sanyo - it would be very rash to change its strategy too quickly in the US. It has 80 per cent of the global Windows Mobile market, and this platform is strongest in the US, where Nokia-dominated Symbian holds less sway than in Europe. Linux will start to make inroads, but not in the short term - indeed, the US market is still growing for HTC, which predicts it will account for 30 per cent of its sales in 2007, the same as Asia, while Europe will drop from 60 per cent to 40 per cent.

In the US, all four top cellcos sell HTC Windows products under their own names - most recently, the Cingular 3125 was launched, offering a small $150 smartphone with an alphanumeric keyboard.

The HTC flagship is a PocketPC with a sliding keyboard, which sells as the Cingular 8125, the T-Mobile MDA, the Sprint Nextel PPC 6700 and the Verizon XV 6700. The company points to this device as a "design breakthrough" at a strong price point, and is understandably resentful that it gains no brand credit for that. But being unthreatening to the cellcos has huge advantages in a world where very few phonemakers will be able to survive on a large scale, and while HTC may be able to score some points over the giants in terms of converged devices and performance, those will certainly not be enough to take on the might of Nokia and Motorola in branding terms.

And while it may be smart to spread its wings to more platforms than Windows, it should not discount too quickly the huge benefits of having Microsoft, even in the unfriendly mobile world, on its side and in its debt.

Copyright © 2007, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

More about

TIP US OFF

Send us news


Other stories you might like