HTC’s second-quarter net profit was well below forecasts even after resolving component shortages that hit its HTC One model, and the company has said revenue for the current quarter could fall by as much as 30 percent from the previous quarter.
HTC shares currently trade at around a tenth of their 2011 peak.
Just three years ago, HTC was shipping 25 million smartphones a year and Chou led a huge expansion, bringing in foreign executives from Sony Ericsson, Apple, Motorola and Microsoft Corp as he sought to take on Apple by doubling HTC’s shipments.
HTC was named Device Manufacturer of the Year at the Mobile World Congress in February 2011 and its market value topped that of rivals Research In Motion Ltd, now BlackBerry Ltd, and Nokia Oyj. Chou ordered champagne to celebrate.
However, as Apple and Samsung reigned supreme, HTC’s annual shipments never reached that 50 million level, and by the end of last year HTC had dropped to 10th among global smartphone makers.
The HTC One, and earlier so-called “hero” handsets from HTC, have won wide praise. The problem has been selling them.
Executives say HTC’s failure to hit sales targets was at least partly down to Chou’s management style.
After hiring a slew of foreign executives, he fell short on promises to senior staff to foster a more open culture and cede sufficient authority. He openly berated managers and overrode their decisions, often with little discussion.
Such an atmosphere, executives said, damaged morale and left managers uncertain of their roles.
Chou kept his sales, product, marketing and design executives separate and, in some cases, created parallel teams doing the same thing. He did not hold meetings of executives of the different departments to iron out problems even as HTC’s performance wilted.
“There’s a culture in HTC not to discuss numbers at senior management meetings,” one former executive said. “Those discussions tend to become hard or ugly, but if you don’t solve it, it becomes bigger.”
Chou’s difficulty in developing a durable global brand of handsets, and building an ecosystem of apps and services around it, raise questions about how HTC can recover under his leadership at a time when high-end smartphone sales growth is slowing.
“With intensifying competition from other top-tier players and the entrance of lower-tier players, we think a long-term margin downtrend is inevitable,” SinoPac Securities Co (永豐金證券) wrote in a recent client note.
Many of the foreign hires have now quit, and HTC’s old guard has re-established charge, running nearly all operations except design from Taipei. That, say those both inside and outside the company, is a mixed blessing.
While leadership tensions may have eased, some warn that concentrating global marketing in Taiwan will create a one-size-fits-all, local approach that will not help HTC grow globally.
“What works in Taiwan is different from other markets,” one of the former executives said.
Chief marketing officer Benjamin Ho (何永生) defended the move, saying in a recent interview with Reuters that it made sense to centralize key functions, but that HTC was “not forgetting that we know we’re an international brand.”