HTC may lose special relationship with Microsoft
Taiwanese vendor reported to be excluded from Windows 8 plans, as it issues a new results warning
Published: 7 June, 2012
Another blow for HTC, which has issued its latest results warning amid reports it has been sidelined in the Windows 8 race, despite its long commitment to Microsoft's mobile platforms.
The Taiwanese vendor lowered its second quarter revenue forecast by 13.3%, citing weaker sales in Europe and recent delays in getting some its products through US customs. Although the latter issue has now been resolved, and the firm has launched well regarded new superphones like the quad-core One X, these developments will not have the desired impact on its second quarter.
HTC now expects revenue for the quarter to be around $3.04bn, down from a previous forecast of $3.51bn. The reduced guidance includes an $86.9m charge related to unsold inventory from last year, and CFO Chia-Lin Chang also pointed to "a bigger softness in Europe than the US". The company has traditionally been stronger in the US, but in the past two years has unleashed a successful branding and marketing campaign in Europe too.
Shipments of two of HTC's flagship devices, the EVO 4G LTE for Sprint and One X for AT&T, were held up last month at US customs to ensure they complied with a ruling from the International Trade Commission, which had ruled that the products violated an Apple 'data tapping' patent. Authorities were checking HTC's claims to have found a workaround and in May allowed the phones to proceed. However, Apple has this week launched a new ITC complaint, claiming HTC is still in violation of the patent, and extending its allegations to a total of 29 models.
The main ray of light for HTC is coming from China, where sales were "better than we thought; we expect China will contribute a representative percentage to the revenue this quarter," Chang said on an analyst call.
The company may also see its role in the Microsoft ecosystem reduced as the software giant moves towards Windows 8, which will be its tablet OS and will span both x86 and ARM architectures. HTC has always been Microsoft's main Windows Mobile partner, but lost its market lead in that sector to Nokia at the end of 2011. The Finnish firm usurped HTC's position as premier mobile Windows partner when it put WP7 at the heart of its strategy, while its Taiwanese rival has, by contrast, increasingly relied on Android for growth.
However, Windows Phone/Mobile has been a valuable sub-business for HTC, and one where it has met lower competition than in Android. But sources claim it is being shut out of Windows 8. Bloomberg sources said Microsoft had excluded HTC from the development of early W8 tablets and other devices, in order to focus on partners which have greater potential to sell high volumes, and greater experience of making tablets.
Unlike Google, Microsoft keeps a tight rein on the firms which are allowed to license its operating systems, and what the resulting products look like. Tablet makers from the traditional PC ecosystem, such as Asustek and Toshiba, have so far been most vocal about their mobile W8 plans, though Microsoft will clearly be courting major slate makers like Samsung, as well as working with Nokia.