Could this be the end of the line for HTC

9.1.2014 Benjamin Gubler
HTC reported a net loss of $101 million for the year’s third quarter, but that might not even be the worst news ahead for the Taiwanese smartphone maker. What’s really worrisome is something we might as well label ‘the smartphone curse’ from now on: experts claim that once a company starts generating negative operating margins from its smartphone sales, that company is never able to pull itself back up. So the analysts have already given up on one of the market’s largest phone makers. But what evidence do they have to back up that absolute lack of hope?

Enter Nokia and Blackberry. Both companies are focused primarily on making phones. Both companies have hit a rough patch and a negative quarter at some point. Both companies are now being sold. Nokia is already a subdivision of Microsoft, while BlackBerry was acquired by Fairfax Financial Holding. Of course, the drop didn’t happen instantly: both businesses went through a kind of post-traumatic period after the first negative quarter, and before kicking the bucket. For these two smartphone makers, that period amounted to about two years, meaning HTC might want to prepare its deathbed for 2015.

But there are those that might seem an exception to this rule. LG electronics had suffered a loss in 2009, but it now seems to be in a remission. However, the important distinction is that LG is not a company solely, or even predominantly focused on building and selling smartphones, so it can offset those losses it experiences in phone sales with profits gained in other businesses it runs. The smartphone industry is by no means static and forgiving, and although some traditional markets might allow for a mistake or two to fly, there seems to be no customer angrier than a smartphone user.

This might not even be considered breaking news if we were to consult the stock market: HTC’s stock prices have declined by about 90% in the last two years, and the company currently holds less than 3% of the international smartphone market, so one could say that they had it coming. Its troubles began with the delay in the shipments, and got exacerbated with the increasingly populated and hostile competition from primarily Samsung, but also Sony, Lenovo, Huawei, LG, and others. Meanwhile, Samsung reported it expects record gains of $9.3 billion for this third quarter. So while the market in its entirety seems to be doing fine, the curse might have just taken yet another soul.

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