HTC’s Worsening Smartphone Woes Could Push Them Into the Arms of Amazon
HTC is back in the news again this week, much to their dismay. The WSJ, Reuters, and others are reporting that HTC’s financial state is worsening which in my opinion could make a deal with Amazon to produce a Kindle smartphone that much more likely.
Taiwanese smartphone maker HTC Corp has halted at least one of its four main manufacturing lines, accounting for at least a fifth of total capacity, and is outsourcing production as a sales slump puts pressure on its cash flow, according to sources with direct knowledge of the situation.
Reuters went on to add that HTC reported their first ever quarterly loss last quarter, and that HTC’s "cash flow from operations dropped to a negative $707.27 million as of the end of June."
The company has slipped from the top ten smartphone makers (according to Gartner), and according to Bloomberg HTC’s share of the global smartphone market fell to 2.8% in the second quarter, down from 5.8% a year earlier. The total market is estimated to have grown by 47% during that quarter, so HTC’s losses aren’t quite as bad as they first appear, but they’re still selling fewer smartphones than they did the year before.
Stories about HTC’s woes have been circulating since at least June, but now that HTC is rumored to be negotiating with Amazon the woes take on a whole new light.
As you probably recall, a couple weeks ago Bloomberg reported that Amazon and HTC have been negotiating since June over the possibility that HTC might make several smartphones for Amazon. And while one should never take a rumor too seriously, HTC’s current financial issues lend a lot of credence to the idea.
At this point HTC has more to gain by signing a deal with Amazon than they risk losing as a result of Google’s wrath.
As you may have read in Ars Technica earlier this week, Google maintains a tight grip on Android device makers:
While it might not be an official requirement, being granted a Google apps license will go a whole lot easier if you join the Open Handset Alliance. The OHA is a group of companies committed to Android—Google’s Android—and members are contractually prohibited from building non-Google approved devices. That’s right, joining the OHA requires a company to sign its life away and promise to not build a device that runs a competing Android fork.
Acer was bit by this requirement when it tried to build devices that ran Alibaba’s Aliyun OS in China. Aliyun is an Android fork, and when Google got wind of it, Acer was told to shut the project down or lose its access to Google apps. Google even made a public blog post about it.
HTC could be in such a bad state that they might actually sell more smartphones to Amazon than they sell right now.
Of course, this would depend on Amazon’s ability to market said phone, but if they price it on the same model as the Kindle Fire tablets then Amazon should be able to clean up.
What do you think?
Thanks Felix, for the idea!