HTC says new structure and reduced workforce will give it best chance of returning to profitability
HTC is laying off 15 percent of its workforce and reorganising into three business units as it seeks to narrow its focus and return to profitability.
The Taiwanese firm was once one of the largest manufacturers of Android smartphones but its fortunes have faded in recent times as it struggled to compete in a crowded, competitive marketplace despite several critically-acclaimed flagships.
In the past few months, it has turned its attention to smartwatches and virtual reality devices alongside its bread and butter mobile phone business and it appears as though it now sees its future beyond smartphones.
The new HTC will comprise three units – virtual reality, connected lifestyle products and premium smartphones – which suggests the company may abandon the mid-range smartphone market currently populated by a myriad of manufacturers, including local companies in key markets like India and China.
It has not been alone in its struggles, with the likes of Sony, Lenovo-owned Motorola, and Microsoft failing to make a serious success of their respective mobile units in recent times. HTC says this restructure will reduce operating expenses by 35 percent and allow it to become a more streamlined, more agile businesses capable of responding to industry trends.
“HTC is an inspirational company driven by innovative people, with a unique blend of expertise in hardware and software integration, advanced technology and world-class design,” said Cher Wang, who replaced Peter Chou as HTC CEO in March. “Now, as we diversify beyond smartphones, we need a flexible and dynamic organization to ensure we can take advantage of all of the exciting opportunities in the connected lifestyle space.
“This strategic realignment of our business will ensure that each product group has the right focus, the right resources and the right expertise to win new markets.”
Analysts say HTC’s future may be away from the smartphone market, in which its premium models can’t establish a niche and a mid-range where it cannot compete with price.
“HTC rose to success because its Sense software was a significant improvement over early versions of the Android UI,” said Dan Gleeson, senior analyst at IHS. “Over time, this advantage has eroded as Google was able to spend more time on Android’s UI. Unlike Samsung, HTC has little proprietary technology to build a device around and make it unique in the market. Unless HTC is able to find some compelling differentiation for its handsets, nothing is likely to improve in the short-term.
“Unlike a Samsung or an LG, HTC does have the size to suffer through a couple bad years.
“While it may seem surprising that a company struggling like HTC is not reducing the number of the areas it is active in despite cutting staff numbers, but HTC’s future ultimately now rests outside the smartphone market. The smartphone market is now highly commoditised and HTC has neither the scale nor the proprietary technology to compete. It needs to find success outside of smartphones, and quickly.”
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