‘Kill bureaucracy,’ HTC chief tells staff

CHALLENGES::The company confirmed that Peter Chou had sent an e-mail urging all workers to talk less, do more and promote innovation to keep the firm competitive

Staff writer, with CNA and Bloomberg

Thu, Aug 16, 2012 - Page 13

HTC Corp (宏達電) yesterday confirmed that chief executive Peter Chou (周永明) had told workers in an e-mail to improve internal communications and “kill bureaucracy” because the company was facing increasing competition in the fast-changing mobile market.

The smartphone maker confirmed the e-mail, reported earlier by Bloomberg News, but it declined to share the e-mail’s content because it was considered a confidential internal document.

“Our workers have understood our chief executive’s thoughts through this e-mail and expressed their appreciation for his reminder,” HTC public relations manager Jessica Pan (潘瑞蓮) said by telephone.

In the e-mail, Chou wrote in English: “We have people in meeting and talking all the time but without decision, strategic direction or sense of urgency.”

“Bureaucracy crept in without clear ownership. We agreed to do something but we either didn’t do it or executed it loosely,” he wrote in the e-mail, which was also sent to HTC chairwoman Cher Wang (王雪紅) and the board of directors.

“Please make sure that we kill bureaucracy,” Chou wrote. “Stay firm with the hero innovations and make them even bigger and deliver them.”

The e-mail may have been prompted by HTC’s struggles over the past year amid stiff competition from Apple Inc and Samsung Electronics Co.

HTC, the Taoyuan-based maker of the Desire, Sensation and One smartphones, has seen its stock price plummet from a high of NT$1,300 in April last year to NT$243.50 at the close of trading yesterday. Its sales last month fell 17 percent from June and 45 percent from a year earlier to NT$25.03 billion (US$834 million).

On Aug. 3, HTC said that third-quarter sales would range between NT$70 billion and NT$80 billion, representing a drop of 12 to 23 percent from the second quarter, because of falling product prices and a change in its product portfolio.

Declining sales and profitability have prompted HTC to close offices and cut jobs to reduce costs.

“We are disappointed that our sales are down, while smartphone market share is growing,” Chou wrote in the Aug. 9 e-mail titled “We are coming back” and outlining “multiple reasons for the challenges” the company is facing.

“Our competitors can leverage their scale, brand awareness and big marketing budget to do things which HTC could not do,” Chou wrote. “The fast growth from the last two years has slowed us down.”

The company’s revenue surged 67 percent last year after jumping 93 percent in 2010, according to data compiled by Bloomberg.

The 55-year-old Chou said the company now needs to build on its culture, “committed” employees and customer relationships.

“Don’t let the processes, rules and norms to impact our important goals,” he wrote. “Of course we have to follow certain rules and criteria but don’t let small things kill the major goals. Again make sure we have big things in mind.”

Following the launch of the One X handset earlier this year, Chou said there are also strong products in the pipeline for this year and early next year, without naming them.

Compared with leading manufacturers, HTC needs to address several challenges before it makes a turnaround, Goldman Sachs analyst Robert Yen (嚴柏宇) said.

“We believe HTC’s problems can be fixed, but require significant executive determination to do a big-scale overhaul, otherwise HTC might continue to be under enormous competitive pressure despite having seemingly decent products,” he wrote in a note recently.

For example, HTC has not been able to deliver effective marketing messages, instead sending messages that were too complicated for the average consumer to comprehend, Yen said.

Moreover, HTC’s internal quality control and public relations problems following several product quality cases have caused significant harm to its brand equity, he said.

Yen also voiced concern that HTC has its feature-planning team in Seattle and hardware team in Taipei, with each team having a different product focus.

“We think HTC needs to go back to the fundamentals of user experience, providing consumers with smooth, reliable, and intuitive features, before thinking of adding more differentiated features,” Yen said.