Earlier this week, HTC announced their fourth quarter 2016 results and although the numbers are not pretty, they have been worse. HTC has and continues to make underlying changes to the business to improve performance.
Compared with the same period last year, HTC’s Q4 2016 revenue showed a 13% drop. It’s operating loss for the period was approximately $117 million, compared with a loss of $133 million for Q4 of 2015; the company’s gross margin also dropped from 13.9% to 10.5%, although the operating margin was the same comparing like with like. This shows that HTC has cut its costs, something the company alluded to with the results. It’s too early to suggest this might mean the company is recovering, but the business is changing how it operates in order to survive. During the fourth quarter, HTC did not release many devices, and those it did, were unremarkable lower and mid-range models.
Where HTC is performing well is in the virtual reality, or VR, scene. Here, the HTC Vive has been well received and has even been incorporated into a number of commercial entertainment facilities such as a theme park horror ride and an arcade, both reliant on HTC’s Vive virtual reality technology. HTC separately reported that it is to work on a mobile-oriented version of the HTC Vive, but one that does not result in using a smartphone placed into a headset. We must wait for the company to release the next generation Vive headset and of course, commercial virtual reality technology is still in its infancy.
One of the ways HTC can reduce its operating expenses is to streamline the number of smartphones it sells. We’ve heard that the company will stop selling lower and mid-range devices, instead concentrating on higher-end handsets. This makes sense from one perspective, as the higher-end devices carry a larger profit margin and are more desirable. However, by only releasing high-end devices, HTC will only be competing in the premium smartphone market: Apple and Samsung are the industry leaders and combine good quality devices with massive marketing campaigns. We’ve already seen the company release the U line, containing the U Ultra and the U Play.
HTC has produced some brilliant products over the years. In our opinion, last year’s HTC 10 was one of the better flagship smartphones ever to release. It’ll be interesting to see what the company in store for this quarter.