Peter Chou, chief executive of cell phone maker HTC, says the Taiwan-based company is no risk- taker. But to a casual observer, that might hardly seem the case.
HTC was the first handset maker to introduce a cell phone based on the Google (NMS:GOOG)-backed Android operating system, the G1 by T-Mobile. It was the first to roll out a phone using the advanced broadband 4G platform, the Evo by Sprint Nextel (NYSE:S - News). In fact, its track record of innovation, including touch-screen technology and innovative software, dates all the way back to 1999 when HTC introduced the first color-screen palm-sized device.
"They've done a really good job over the last decade making the transition from a maker of electronics for other firms to building a global brand and becoming a major player in smart phones," said Michael Gartenberg, partner at research firm Altimeter Group. "They're not afraid to innovate and push the envelope forward."
The result is a company that is steamrolling ahead with the fastest growth in the cell-phone market, better than even Apple (NMS:AAPL).
"I don't see us as a big risk-taker, but we are committed to taking up a challenge and doing new things," Chou said.
HTC wants to be careful about betting the farm to protect its employees, partners and investors.
"But we are never afraid to bring to the market something different," Chou said. "If we make mistakes, we admit that and fix it quickly instead of blaming someone for this or that. We are humble and passionate about innovation."
It's a strategy that clearly works. HTC is now the world's fourth- largest maker of smart phones, according to research firm IDC, with a 7.6% market share. Nokia (NYSE:NOK - News) is first with 38%, followed by BlackBerry maker Research In Motion (NMS:RIMM) at 17.8% and Apple at 13.3%.
Including all handsets, HTC broke into the top 10 during the second quarter, says researcher Gartner. HTC shipments rose 139% to 5.9 million units, making it the eighth-largest global vendor. Its growth was more than double that of Apple, which had the second-fastest growth and is in seventh place.
In its second quarter ended July 29, revenue of HTC, whose shares trade on the Taiwan exchange, grew 59% from a year earlier to $1.9 billion. Net profit rose 73% to $269 million. Its stock is up 44% since June 30.
In the third quarter, HTC expects revenue of $2.2 billion, up 106% from a year earlier. It also expects device shipments to soar 132%.
Humble Beginnings
There was a time when HTC was a nobody. Chou co-founded HTC in 1997 with Cher Wang, the daughter of one of Taiwan's richest entrepreneurs. A Taiwan native, Chou has a degree in electronic engineering from National Taiwan Ocean University and completed the Advanced Management Program at Harvard Business School.
In 1999 when HTC was just getting its feet wet and working with telecom carrier British Telecom (NYSE:BT - News), it needed help, Chou said.
"At the time, we were a small and inexperienced company and the only thing we had was an idea," Chou said. He approached BT executives and said plainly, "You guys need to help and support us and teach us what areas are critical and important," Chou said.
Chou also reached out to cell phone chipmaker Qualcomm (NMS:QCOM) for tips on how to develop the best phones. Both answered HTC's call.
"They taught us a lot," he said.
HTC's first focus was to build phones that telecom carriers sold under their own label. Then, four years ago, it got ready to sell phones bearing the HTC label instead. Two years ago, HTC launched a branding campaign, adopting the slogan "Quietly Brilliant."
"More than 90% of our phones today are HTC-branded," Chou said.
Its carrier partners include all the majors, including AT&T (NYSE:T - News), Verizon (NYSE:VZ - News), Sprint and T-Mobile.
"Their transition from a design manufacturer (for other companies) to a branded manufacturer paid off," said Brian White, an analyst at Ticonderoga Securities. "Their products have been a big success. They've clearly entered the big leagues and are gaining share."
HTC's rise is also notable in that its rivals are much larger with roots in design and engineering: Nokia, Samsung, Apple, RIM, LG, Motorola (NYSE:MOT - News) and Sony Ericsson (NYSE:SNE - News) (NMS:ERIC).
Gambling On Droids
"One of the biggest risks they took was committing to Android so early," said Avi Greengart, an analyst with researcher Current Analysis. "They made a big bet on Android before the operating system was fully finished and it paid off extraordinarily well."
HTC was also an early and strong supporter, and still is, of the Microsoft Windows Mobile platform, which has been sputtering in the market the past few years. HTC will also be introducing phones based on Microsoft's (NMS:MSFT) new operating system for mobile, which has been rebranded as Windows Phone.
"If HTC had stuck to its knitting and just stuck with Windows Mobile without diversifying into Android, they'd be in real trouble right now," said Greengart.
HTC has introduced a slew of Android devices. Its Web site currently lists 27 various cell phone models. These include Droid Incredible, Evo 4G, MyTouch 3G Slide and HD2.
Chou credits HTC's success to many things. It started with what has traditionally been a mainstay of Taiwan-based companies: highly competitive manufacturing, excellent engineering and strong customer partnerships.
Other ingredients for long-term success are innovation and marketing, which many Taiwan firms lack, most analysts say. Taiwan players are said to have traditionally relied on clients for help in those areas.
"HTC wanted to create that kind of innovation to achieve greater success," said Chou.
Innovation is something Chou learned early on as an executive with computer pioneer Digital Equipment Corp., later acquired by Compaq, which was then acquired by Hewlett-Packard (NYSE:HPQ - News).
During his time at DEC, Chou spent lots of time in Silicon Valley, rubbing elbows with engineers at Intel (NMS:INTC), Microsoft and others.
"I've been working on innovation for a long time," he said.
He's worked hard to instill that culture into HTC, hiring top individuals, embracing them and setting them free to innovate.
"A lot of companies say they focus on innovation but they lack the talent and involvement," said Chou. "When they face difficulty, it can be easy to compromise. We encourage people to take risk and encourage and challenge them to create something exciting. You need to have passion and set high standards to achieve that."
"HTC innovated very quickly," said Ken Dulaney, a Gartner analyst. "They innovate very well and understand what customers want."
by Yahoo News, August 13, 2010
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