CAN SOMEONE HELP ME CONSTRUCT A Executive summary? only the executive summary.

TQM Case Analysis

THE CASE OF LOSING THE SMARTPHONE GAME: HTC IN DISARRAY

Founded by Cher Wang, HT Cho and Peter Chou, HTC Corporation formerly known as High-Tech Computer Corporation, is a Taiwanese manufacturer of Smartphone and tablets headquartered in New Taipei, Taiwan. It began as an original design manufacturer and original equipment manufacturer. In 1998, it started designing some of the world's first touch and wireless hand-held devices such as mobile phones, touch screen phones, and PDAs based on Windows Mobile OS and Brew MP to market to mobile network operators who were willing to pay a contract manufacturer for customized products.

The company's growth has accelerated dramatically since being chosen by Microsoft as a hardware platform development partner for the Windows Mobile operating system. HTC also works with to build mobile phones running Google's Android mobile OS such as the Nexus One. HTC's sales revenue totaled $2.2B for 2005, a 102% increase from the prior year. It was listed as the fastest-growing tech company in Business Week's Info Tech 100. HTC has invested strongly in research and development, which accounts for a quarter of its employees.

HTC expanded its focus in 2009 to devices based on the Android, and in 2010 to Window Phone and in the same year the company launched the HTC Evo 4G, the first 4G-capable phone in the United States. In July 2010, HTC announced it has begun selling smart phones in China under its own brand name in a partnership with China Mobile and that sold over 24.6M handsets, up 111% over 2009.

HTC's golden era saw a string of firsts, including the Nexus One, Google's first self-branded Android device, forging a partnership poised to dominate the market. "Where there used to be nothing", Lois Fagan, Sprint's head of phone selection, told the Wall Street Journal. "Now there's a force to be reckoned with."

Not to rest on its laurels, HTC took a page from Apple's playbook and acquired One & Co., a 20-person San Francisco studio hat got its start designing snowboards in 2008. Realizing aesthetics are as important as function, HTC tried to separate itself from a crowed Android market by combining sleek form with robust function. HTC heavily invested in its own software, dubbed "Sense", a clumsy interface that run atop Android for a customized look and feel. Its purpose mainly is to differentiate itself. HTC's peak of success was 2010.

That same year in March, Apple Inc. filed a complaint with the US International Trade Commission claiming infringement of 20 of its patents covering aspects of the iPhone user interface and hardware. HTC disagreed with Apple's actions and reiterated its commitment to creating innovative smart phones. HTC also filed a complaint against Apple for infringing on 5 of its patents and sought to ban the import of Apple products into the US from manufacturing facilities in Asia. Apple expanded its original complaint by adding two more patents.

On February 16, 2011, HTC was named the "Device Manufacturer of the Year" by the Mobile World Congress. That same year, the company's market value surpassed that of Nokia, making it the 3rd largest Smartphone-maker in the world behind Apple and Samsung.

HTC lost focus, and began a long list of hasty acquisitions. On July 6, 2011, HTC announced that it would buy VIA Technologies' stake in S3 Graphics, thus, becoming the majority owner of S3. A month after HTC acquired Dashwire for 18.551 50-M, and invested S40-M in US-based gaming firm OnLive then followed by acquiring interface designer Inquisitive Minds for 13. 100-M on a gamble to establish a beachhead in online services as part of a strategy it believed would differentiate its products from the like of Samsung.

HTC added bells and whistles, a strategy eerily similar to the mistakes of Nokia and Sony Ericson years ago. But rather that adding more megapixels and Walkman functions, HTC invested in a series of fruitless features, culminating in a $300-M stake in Beat Audio. Either due to poor planning or poor execution, the services that emerged from those investments were either lackluster or mediocre at best.

The Q4 of 2011, HTC posted a further 80% drop in revenue, to say HTC fell on hard times would be an understatement. At the end of 2011 HTC shed an incredible $27-B or more than 75% of its market cap. Make no mistake, the company is hemorrhaging.

HTC lost much of the US market shares in early 2012 due to increased competition from Samsung and Apple Inc. In the middle of the same year, HTC moved its headquarters from Taoyuan City to Xindian District, New Taipei City.

Mr. Chou saw the market reaction to its earnings forecast in August 2012: HTC shares slipped 4% as the close, taking it decline past 50% for the year on top of 40% drop in 2011. It was being beaten on all fronts, and workers morale was at an all-time low.

Apple and HTC reached a 10-year license-agreement, terms remain confidential, in November 2012 covering current and future patents held by 2 companies.

According to analyst firm comScore, HTC only accounted for 9.3% of the United States smartphone market as of February 2013. In light of the company's decrease in prominence, Mr. Chou had informed executives that he would step down if the company's newest flagship phone, the 2013 HTC One, had failed to generate impressive sales results. HTC's first quarter result for 2013 showed its year-over year profit drop by 98.1%, making it the smallest-ever profit for the company- the delay of the launch of the HTC One was cited as one of the factors.

Its flagship handset, the aluminum-bodied HTC One, won the best Smartphone award at the Slough's ahead of rivals including the Samsung Galaxy S4 and the latest iPhone. It has also scooped as iF gold award, a German product design gong sought after by the likes of BMW and Apple. But the awards and games cannot conceal the fact that the last 3 years of the Smartphone have been very difficult for HTC. After setting the pace in the early years of the Smartphone with the 1st handsets based on Google's Android software, t'was overtaken by Samsung and Chinese brands such as Huawei.

Mr. Chou is still focused on world-class design and engeneering but he knows the numbers must wok too. On the other hand , employees frequently draw comparisons to Apple co-founder Steve Jobs, saying "Mr. Chou has a visionary understanding of what makes a good product and it responsible for his company's strong designs. But they also call him a difficult boss, who can have a short fuse and often makes an 11hours demands." a long time HTC engineer says.

HTC's market share has dwindled, and revenues have fallen every quarter since late 2011. Profits have nearly evaporated. HTC slashed its executives' total compensation by more than half in 2012, amid poor earnings and declining market share, according to the company's annual report. The embattled Taiwanese Smartphone maker paid 31 executives a combined US 22,,,51 1.36-B in 2011.

"Our competitors were too strong and very resourceful, pouring in lots of money into marketing. We haven't done enough on the marketing front" Mr. Chou said in an interview with The Wall Street Journal. Sure, marketing probably played a role in HTC's overall poor performance, but it was not the biggest contributing factor. HTC's problem had more to do with logistics than advertising.

HTC's biggest flaw had little to do with the One's software, hardware or design. It was that it builds up so much hype and then shipped late. The original HTC One was announced in mid-February with the promise it would be in store by March. But the end of April, it was still nowhere to be found; the hype cycle passed it by when Samsung announced the Galaxy S4 and shipped it the following period. HTC lost its window to dominate the news cycle, get its Smartphone in consumer hands and build a network effects. In the end, the HTC One was a good-looking device that fairly few people actually bought.

Several sources pointed to Chou, who has promised to step down if the flagship One is not retail success, as a roadblock, making snap decisions in lieu of a long-term strategy, HTC staff are said to have Mr. Chou months ahead of the One's release of possible supply and manufacturing delays, but were told to push anyway. Indeed, the One was saddled with inventory problem after launch.

David Yoffie, HTC's board member and Mr. Chou's former professor at Harvard Business School, says the possibility of changing the HTC chief executive has never been raised during a board meeting. "The board has a lot of confidence in Mr. Chou, and share price is not going to drive decisions on the future of their chief executive." Mr. Yoffie says.

Even if HTC can resolve its platform and intellectual property uncertainty, it still faces trouble as financials continue to be in the doldrums. Ms. Wang says that the company must communicate better with customers, remarking, "Our communication does have problem but we are improving on that. It's gap between our new product coming out and we are improving our innovation and our marketing. "She puts direct communications with consumer at the center of its overall business strategy. The best product and cutting-edge technology are still the most valuable assets of the company. Our biggest need in the forthcoming quarters will be embarking on alternative marketing strategy.

HTC Has released its unaudited quarterly earnings, shown in Table bellow, and the results confirm what its losing money. The Smartphone manufacturer made a net loss of NT 2.97, 101 million on revenue of NT 47.05, 1.6 billion. Operating loss was NT 3.50. 50 and 60 billion for the 2nd quarter, down on last year's NT$70.2 billion. It appears that sales of devices such as the HTC One over the past few months have failed to meet the company's expectations, as revenue down 33% year-on-year.

HTC QUARTERLY PERFORMANCE 2012-2014

(Revenue - Profit NT$ Billions)

Particulars

Financial Quarter

2012

2013

2014

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Revenues

91.0

70.2

60.0

42.8

70.7

47.0

42.9

33.1

65.06

Profit

7.4

3.9

1.0

.85

1.25

(-3.0)

0.31

(-1.88)

2.26

Source: HTC/Verge

The fiscal struggles have led some to believe that a sale or merge perhaps to Chinese OEM would be the best route for HTC. Indeed, after Blackberry, Ltd., posted its own first loss, which to be fair/clear was much larger nearly US$1-B, it announced a sale which currently being finalized. However, Ms. Wang is actively blocking any purchased of HTC.

""We had challenges in 2013, especially in the finance area," says Mr. Chou. "There were two problems. First, was that we couldn't supply enough initially and second was our mid-tier handsets were weak. This year we want to put effort into enhancing our mid-tier" The effort was spearheaded by the Desire816, adopting the most popular features of the HTC One to cheaper materials and hardware. It will target the massive Chinese market among others, where Mr. Chou is wary that "they don't play by rules" and "it s too easy to destroy value", but knows HTC must compete to stay relevant.

But unlike North America and Europe, emerging markets are extremely price-sensitive, and local rivals, like ZTE and Huawei, produce far cheaper, low to mid-tier devices, dominating the sector. HTC, meanwhile, tried to make inroads with high-end devices, with no intentions to offer low-end solution. "We don't want to destroy our brand," Mr. Chou told All Things D. "We insist on using better materials to, make better products that offer premium experience." The company, whose products cost 2,000 Yuan, or around $315, refused to cut it to less than 1,000 Yuan, effectively pricing itself out of the region. Last year according to Garner, HTC has a meager 3% share in China, compared to Apple's 10% percent and Samsung's 20%.

HTC is pushing its brand, but mass awareness takes time since reputation is built overtime thru string of strong-selling products. The most damaging move was applying a high-end strategy to a low-end segment. Not only did this fail on both ends, but it wasted valuable time which could have used to develop a brand, HTC was squeezed in the middle by Apple and Samsung on the high-end in North America, and ZTE and Huawei on the low in China and India. On the high-end, HTC was outgunned by brand value. In an industry where products were inncreasely - homogenized, brand was and will be, largely the deciding factor for success. On the low-end, the strategy was simple; cut costs and sell cheap Smartphone packed with features.

HTC, once the darling of the Android Smartphone market, experienced yet another quarter of missed expectations, low revenues and meager sales. As Bloomberg notes, the company posted a first quarter net income of NT 85( 2.8million); a 98% decrease from year ago quarter. HTC say monthly revenue for Mach was NT$15.82 billion; a boost of 39.69% from the prior month but still around half of the revenue from March 2012. "HTC made mistakes in its product pricing and it has too many models, which confused consumers," says Jeng-Han Cheng, a senior manager at Taiwan's Yuanta Financial Holding, which holds HTC shares.

HTC's problems in2013 also meant a shift for Mr. Chou himself. Under pressure from shareholders who have seen HTC lose four fifths if its value since its peak in 2011. In October he handed over some responsibilities for supply chain, marketing and distribution to his co-founder Ms. Cher Wang, the HTC's Chairwoman and also acting chair of VIA Technologies, HTC main division, including the Information Appliance(IA) engineering division and the Wireless Mobile engineering division, both ISO 9001/ISO 14001 qualified facilities. While HT Cho, also HTC co-founder, serves as Director of the Board and Chairman of HTC Foundation, HTC's CFO is Hui-Ming Cheng.

The Verge has learned that HTC's Chief Product Officer, Kouji Kodera, left the company last October 2013. Kodera was responsible for HTC's overall product strategy which makes the departure especially notable on the heels if the global launch of the make-or-break One. It's not just Kodera. In the past three-odd months, HTC has lost a number of employees in rapid succession-most recently Jason Gordon, the company's vice president of global communications. Other fresh departure include global retail marketing manager Rebecca Rowland, director of digital marketing Jon Starkweather, and product strategy manager Eric Lin, where in May 2013 tweeted,: "To all my friends still @ HTC - just quit. Leave now. It's tough to do, but you be much happier. I swear." It's not a coordinated poaching effort that's draining HTC's Seattle -based North American operation. Starkweather has landed at AT&T while Lin and Rowland have been both joined Microsoft. "Anyone who's heard of them in Seattle doesn't want to go work for them right now. They're like T-Mobile two years ago," one source told, gesturing to a downtrodden. T - Mobile that was hemorrhaging subscribers leading up to AT&T's attempted and failed acquisition. Sacking of senior executives earlier was seen by some observer as a sign of serious trouble ahead for HTC.

Now marketing missteps shipment delays of its flagship Smartphone and the rise of new competitors over the past year have pushed the company out of the top five Smartphone brands in the US. Meanwhile, a string of recent high level executive departure also has raised concerns about the company future. Interviews with current and former executives reveal the challenge of a company trying to make the jump from a first mover in a nascent Smartphone sector into a consistent player in a now-crowded industry. Since its meteoric rise and equally catastrophic fall a year and half ago, some are now left wondering if the company has any juice left to power a comeback.

With every stumble, speculation increases that HTC may become a takeover target Given its plunging stock price, the company is now trading at only eight times earnings, compare to Apple at 14times in 2012, HTC is down more than 50% or around $6-billion off its market cap, making it a relative bargain. Chinese companies like ZTE and Huawei have been speculated as possible suitors, which may be looking to make a switch into high-end devices, as well as Lenovo, which seeks to expand distribution and enter the Smartphone market.

But realistically, the value of such a buyout- as was the case when Google paid for S12.5 billion for Motorola- is in the value of its patent portfolio. Google acquired over 17,000 patents in the transaction. HTC, meanwhile, hold less than a tenth of that, making it significantly less attractive, in addition, a Chinese buyer need Taiwanese regulatory approval before acquiring HTC- a sticky matter in the world of foreign relations, to say the least, adding to the difficulties of a deal.

CAN SOMEONE HELP ME CONSTRUCT A Executive summary? only the executive summary.