HTC Spending More on Advertising to Regain Former Market Share

Taiwan's HTC Corp is stepping up advertising to ensure sales of the One M8 (Review | Pictures)smartphone live up to the new flagship's critical acclaim, and win the vendor a bigger share of the developed markets it once dominated.

HTC reached the top of the U.S. market in the third quarter of 2011, when it sold one in every 10 smartphones worldwide, according to Strategy Analytics. But its global share dropped to 2 percent along with a share price which plummeted 86 percent.

The fall from grace was speeded up last year when sales of predecessor flagship One M7 (Review) failed to match the phone's rave reviews because of disruptions in the supply chain and a marketing campaign widely dismissed as brash and confusing.

HTC plans to avoid a similar outcome befalling the M8 with "more effective and efficient marketing," Chief Financial Officer Chialin Chang said at a quarterly investor conference on Tuesday.

The M8 will lead a diversified product portfolio that will help HTC retrieve market share in developed countries, Chang said, without giving specific targets.

The M8's toned-down advertising campaign with actor Gary Oldman has been well received by commentators, who said it is an improvement over last year's campaign fronted by Robert Downey Jr. So far, the M8 is selling quicker than the M7, Chang said.

"We are increasing our media ad buys in 2014 over 2013."

Even so, HTC expects revenue to land in a range of T$65 billion ($2.16 billion) to T$70 billion in the April-June quarter, slightly below the T$71 billion of the same period a year earlier.

That would nevertheless be about double the T$33 billion booked in January-March, when ineffective marketing and weak M7 sales contributed to a net loss that was wider than analysts estimated at T$1.88 billion.

The first quarter finished in March with HTC ending 28 months of on-year sales declines. HTC logged another sales rise in April indicating strong shipments of the M8, which was released in late March around a year after the M7.

The start bodes well for the second quarter which Chang said is likely to see HTC return to profit, helping the company break even in the first half or even end in the black.

Shares of HTC rose for a fifth straight day before the briefing on Tuesday, hitting a nine-month high on expectations of a strong revenue forecast. They closed up 3.6 percent compared with a 0.5 percent gain in the benchmark index.

Mid-tier
HTC's future is not as dependent on its flagship model in advanced markets as it once was, as sales of lower-priced models in emerging economies are growing at an increasing rate.

The high-end market is slowing from its peak of just a few years ago when HTC, as a relative unknown, pitted itself against established consumer technology companies such as Apple Inc.

Addressing that shift, Chang said HTC will "dominate the mid-tier" and "participate in the affordable segment," which he defined as prices in a range of $150 to $200.

"We are aiming for incremental market share gain at all levels," Chang said. "The (M8) volume this year is better than last year, so if the market stays the same then our market share will grow."

Researcher IDC projects the smartphone market to grow 19 percent this year from 39 percent in 2013.

© Thomson Reuters 2014