HTC weathers the storm as it looks to get back on track

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In his first media interview since joining as president of Europe, Greig Williams says the business restructure has put HTC in a position to prosper in 2017

HTC has encountered a rocky few years but in his first interview as president for Europe, Greig Williams paints a picture of a company that is turning a corner.

The experienced former Microsoft Mobile vice president, who joined in July after spending more than 14 years at Nokia in a number of senior management positions, is quietly positive when asked about the manufacturer’s current progress.

“I would characterise it as forward-thinking, optimistic,” he says. “The team has been through quite a bit if we look back over the recent past but there is an air of optimism for a few various reasons.

“Since I’ve joined HTC, I’ve seen a change already. You sometimes have to go through those necessary, but quite painful, decisions and it takes time for people to start looking forward. As they go through that change at a different pace, you also go through that period of doom and gloom and you need to pick them up.

“A lot of things help, not just where we are in terms of new products and innovations that are coming, but we have two legs of the business that are starting to get quite interesting, and whether we can get
those to support each other would be great.”

Highs and lows

The Taiwanese manufacturer, co-founded by current chairperson and CEO Cher Wang in 1997, was known as a company that introduced a number of industry firsts, such as the first smartphones with in-built GPS, 3G and Google Android operating system capabilities.

However, it found itself on an alarming slide, as Samsung and Apple began to dominate the market with their respective Galaxy and iPhone smartphone ranges, holding more than a third of the market combined in Q3 2016.

HTC was at the peak of its powers back in Q2 2011 and according to figures from Statista, was the fifth largest smartphone manufacturer in the world, accounting for 10.7 per cent of the global smartphone market.

However, just 12 months later, this share had plummeted to four per cent, with the manufacturer not featuring in the top five rankings since.

HTC’s annual revenues have taken a massive hit, falling from a high of NT$465.79 billion in 2011 to NT$78.16 last year, That had fallen 35.77 per cent from the previous 12 month period (see box out, right).

The manufacturer also revealed that revenues in December 2016 were NT$6.406 billion, but that had fallen only marginally by just 1.7 per cent from the same month a year earlier.

In July 2015, HTC changed the structure of the business, and just a month later announced plans to cut up to 2,500 jobs as part of a “business realignment”. This would be part of a wider global cost-cutting exercise that the company said would reduce operating expenditure by 35 per cent.

It also said global headcount would reduce by up to 15 per cent from a reported 16,746 employees in an attempt to streamline operations.

The manufacturer said it would establish “new business units” to focus on premium smartphones, virtual reality technology and connected products.

Williams: team is now ‘optimistic’ and ‘forward-thinking’

Path to recovery

At the time, Wang said: “As we diversify beyond smartphones, we need a flexible and dynamic organisation to ensure we can take advantage of all of the opportunities in the connected lifestyle space.

“The strategic realignment of our business will ensure that each product group has the right focus, the right resources and right enterprise to win new markets.”

This restructure continued in earnest and just two months later, HTC announced the decision to split its EMEA branch into three separate divisions as part of a business realignment aimed at driving sales. It created new divisions in Eastern Europe and Russia, Middle East and Africa, and Western Europe, claiming this would “set us up for success”.

HTC has managed to prevent any negative headlines since, and last March released its debut virtual reality (VR) headset, Vive.

This was followed a month later by the launch of the HTC 10 flagship smartphone, and at the time EMEA operations head Graham Wheeler told Mobile News that the launch of these new products was seeing HTC experience “great momentum”.

Williams joined three months later and claims he was well prepared for what he was walking into and could quickly see it was a company on the right path to recovery.

Runaway train

“I had been following HTC and went through a similar situation in my past, so you build this ability to understand what people are going through and what’s needed to pick them up. I therefore wasn’t under any illusions as to where [the company] was.

“It hurt so much because colleagues were struggling with others moving onto other places. So you did feel that but it’s a very flat organisation and when a decision is made, it’s done and you can move on.

“I’m starting to see that this decision making and understanding what is being looked for, you can make those decision quicker. I like the environment – culture is a very important thing to me, especially having spent a long time at the previous company.”

Williams is particularly blunt in his assessment of where and when things started going wrong for HTC, labelling the speed at which such moves happen as “brutal”.

He claims its rapid early growth turned it into a more complex company but that this pace of growth could never last forever, particularly with the overall market beginning to grind to a halt.

“When organisations grow, they get more complex, particularly those coming from a start-up position. When this happens, you have to look at the speed of the growth.

“I think of it as a runaway train and even back in the early 2000s, other companies were like that where the executives are stuck on the front of this train and shouting: ‘Wow look at us! We are growing sales like hell!’ Guess what? The industry has 20 per cent penetration and the whole world wants this. By that very nature, you are successful.

“What happens is when that train starts to slow and go uphill, there’s isn’t as much momentum propelling it and the decisions start to really matter. The speed at which it happens in this industry is brutal.”

Vive le Vive

So what changed in 2016? HTC’s revenues may have slowed and declined but there is clear evidence of it deploying the strategy set out by Wang when she announced the internal restructure in August 2015.

The manufacturer has quickly diversified into other product areas. It released its debut virtual reality headset, Vive, last March, and it appeared to be an instant success – the manufacturer’s VR product specialist Shen Ye was quickly on Twitter to tell his thousands of followers that it had received 15,000 pre-order requests within 10 minutes and being made available.

In a conference call with investors in October, president of global sales Chia-Lin Chang revealed that sales of the headset had topped 140,000 units inside its first six months on sale. According to IDC, global revenues for the VR/AR market will surge from £5.2 billion to $162 billion in 2020.

Despite a slowing smartphone market, HTC also doesn’t appear to have taken its foot off the gas when it comes to handset releases.

A month after Vive was made available, the HTC 10 flagship smartphone was unveiled, followed by the Desire 10 smartphone range in September.

It has arguably been the busiest manufacturer of 2017 so far and was clearly looking to make a quick impact, by announcing both the U Ultra and U Play smartphones earlier this month.

Vive headset sales reached 140,000 units in the first eight months

Williams claims HTC is now transforming itself into a more balanced company, with product innovation at the core and the expansion of the portfolio in the right areas, but there
is still much work to be done.

“You can go through all the firsts that we have achieved – it’s that innovation and continued drive that helps a lot.

“It can also be a bit of a challenge because your greatest thing is your product, and if you swing and a miss, you need to have something to fall back on. That’s where you need to have a more balanced approach – sales and marketing channels have to be able to support you.

“A few years after the iPhone launched, it was the biggest year for a company like Nokia. Why was that? It wasn’t because their products were particularly stellar, it was the channel and support that kept it going. You pull through with things like the product industry and innovation.

“If you don’t have the other bits, then you won’t get the full momentum out of it and you can start to stutter a bit, so that’s what we will look to get straight.”

Open for business

Channel support will be key to HTC’s success, and it has spent nearly a year trying to develop this after signing Data Select as a distribution partner for its smartphones in the UK.

Williams made an hour-long presentation to the 100-plus dealers at the Data Select Platinum Club conference in October in an attempt to stress jut how important the manufacturer regards them as part of its future growth (see Mobile News issue 626).

He declared HTC “open for business” in the B2B channel for 2017 and committed to increasing support and investment for partners to boost its presence and sales in the UK.

Williams was blunt in his assessment of HTC’s presence and performance, even going as far to say it had “taken a year off”, adding that it hadn’t made enough of an effort to visit dealers, promote the brand and encourage them to sell its products.

“We had sessions with customers who would say: ‘It’s good to see you guys.’ I’m looking at our sales guys and thinking: ‘What have  you been doing because they are saying they haven’t seen us!’ Dealers were also saying: ‘You don’t sell much or market well’

“Those comments are quite humbling but it also adds to the optimism because if you haven’t been speaking to people but then you suddenly get out and do that, your opportunities to grow the business are a lot better.

“We seemed to batten down the hatches and that’s not healthy. You still need to have your course and direction set and ultimately be in control or else you start being adrift.

“I could sense that in the team but you have to pick them up and start to look forward. Optimism is a pretty big thing. You obviously have to back it up, think about things in a different way and challenge the status quo.”

New strategy

During the conference, it was clear that despite only being in the job for three months, Williams was already setting out a clear change in strategy by focusing more on the indirect and distribution channels after admitting previous failings there (also see Mobile News issue 626).

He admitted HTC hadn’t been the easiest to work with but with increased support and investment into the channel, sensed a radical change in its fortunes.

Williams claims that it is becoming more important to identify channels that can retail your products differently, while presenting customers with as many point-of-sale opportunities as possible.

“We’re not going to be able to do everything. We can’t be across all channels and investing everywhere. I have to look at what channel we can achieve real cut-through and address it in a very focused way, and I do feel that is things like distribution.

“Of course, you can do that with the big operators but the barriers to that are that there are various things to work around, such as ranging periods. So those things are very difficult to switch on but the key thing is getting that extended sales force.

“If you look at some of the big competitors out there, they employ very few people internally but what they do is have this extended force with thousands of points of sale, pushing products out when perhaps there might be more of a pull. That’s where people are looking for options.”

Engaging the channel

However, this won’t be a strategy that will present immediate results overnight. Some dealers have been around the industry for 30 years, and still prefer to recommend smartphones from long-established B2B players, such as BlackBerry, to their customers.

Others we have spoken to recently continue to favour iPhone, but with its popularity reportedly waning many have now turned to Samsung. However, HTC has never been mentioned.

Williams says HTC first has to go out and win their trust and present to them a business plan that is beneficial for both parties.

He is fully aware of the manufacturer’s lack of interaction with the channel and knows it will be impossible to be successful with everyone he speaks to. However, Williams seems prepared to bide his time to get the right partners on board.

“I’m appreciative that they want to speak to me, and that’s an important thing. I won’t make any illusions about it – I could go to them and promise the world but that would be stupid because I can’t deliver that.

“What I can do is look for a realistic proposition that works for both of us, taking the view that we will cultivate this to something bigger. That resonates well because you have to be both optimistic [and] realistic at the same time.

“I’ve heard that we haven’t spoken to them for a while but let’s start here and take baby steps. Let’s not be ridiculous and say we are going to do massive volumes or take 50 per cent share but instead start building that way so this time next year we can discuss the progress we have made together.

“I’ll sit in a room and speak to 50 dealers and probably won’t be able to be successful with all of them but there will be a percentage of people in that room that will go: ‘Right, we did, and that’s good.’ It could be a case of: ‘This time last year you weren’t speaking to us, [but] now we’re being visited and have support and understand what the portfolio is.’”

Distribution partnership

While expanding its product range will be key to building a stronger rapport with dealers, Williams has his eyes fixed on the service piece this year, making sure they have everything at their disposal when using an HTC device in a B2B sale.

He again points towards the distribution partnership with Data Select as a key driver, particularly from an insurance perspective.

Supercover partnered with the distributor to offer its B2B and consumer partners insurance plans, with Data Select partners receiving 25 per cent ongoing revenue share from every insurance sale. Its policies cover a number of elements such as theft and loss, as well as accidental, liquid and malicious damage.

“The service bit is something I will be spending a lot of time on. In many different countries I visit, I’m told that we have industry-leading products that win awards but we’re not telling anyone about it.

“The second thing is if you’re having that premium pitch of your products and you’re not playing down the sub-£100 price range, you need to be able to serve your customers well.

“There are different ways of economising but you shouldn’t compromise on that end customer piece. You need to bolster it and particularly in enterprise where if they have hundreds of devices in a channel, they want to know that they have that support.

“That is also an opportunity for partners like Data Select because there is a service opportunity too, such as insurance. Distribution is moving that way because they are starting to generate these recurring revenues. People are willing to pay for those services but at the same time the base needs to be solid.”

HTC is boosting staff numbers at its office in Slough as it looks to increase support to dealers

Recruitment drive

To ensure it has a bigger voice in the indirect channel and the overall European market this year, Williams is on a recruitment drive. It currently employs 91 people at its Slough office, which also incorporates some of its business across Europe.

In fact, he was so impressed by someone performing a demonstration at the Data Select Platinum Club conference event in October that he recruited her to work more closely with dealers, persuading them to sell more HTC products.

Williams wants to add strength to its digital marketing teams, which he feels is paramount to bringing more partners on board.

“I’m looking for the right people and not just looking to rush and fill gaps, which can be painful. In customer engagement, we need to have a healthier balance of our guys out there talking to salespeople but also how we do our channel marketing, and that is an area we will look to bolster.

“We will focus on certain areas to ensure that those channels we work with are done properly. We would rather do a 110 per cent job with a few customers than just a 50 per cent job with all of them.

“The team in Slough has gone through a tough time but they are really starting to look forward, and you will see a big difference during the first half of 2017.”

Ambitions

Despite the big ambitions for growth and making more of an impact in a number of channels this year, Williams is clearly not getting carried away and refuses to be drawn on specific targets.

Over the years, Mobile News has spoken to a number of manufacturers that have made outlandish claims for the year ahead, such as doubling UK market share to achieve a certain milestone.

Williams understands from his 15 years at Nokia and Microsoft – that have encountered problems over the last few years – that step-by-step growth is the path forward.

His primary focus is not only to gain new customers where possible, but to serve them well enough to ensure that when they do upgrade, it’s to another HTC device, thus keeping the churn rate to a minimum.

“We might reach a break even point in terms of market share of three per cent, and that’s great as not many can do that. We then have to see what we need to do from there.

“You have to have that integrity, keep going and keep doing the right things. We have a lot of fans and if we can sell to them, we’ll have a very healthy business.

“It’s about making sure you take care of the people that have bought your product. They will come back because you have provided them with a good experience and are continuing to innovate.”

Rival woes

In line with this, Williams is refusing to be distracted by troubles that its rivals have encountered over recent months, and he wouldn’t be drawn on whether this presents an opportunity to acquire customers from them as a result.

Samsung, which leads the smartphone manufacturer market, with share of around 20 per cent as of Q3 (according to figures from IDC), was forced to pull its Note7 device from sale around the world in October after numerous reports from buyers of them overheating and catching fire.

Leading analysts told Mobile News that its brand had been “permanently damaged” as a result. Gartner research director Roberta Cozza labelled it the industry’s worst-ever recall while Edison Investment Research technology analyst Richard Windsor warned it could trigger a loss of faith in the brand.

Around the same time, BlackBerry announced it was axing all internal hardware production, just three months after it reported losses of £571 million for its first financial quarter.

TCL, parent company of Alcatel, later acquired the BlackBerry licence to continue to manufacture smartphones under the Canadian vendor’s brand.

In September, Microsoft’s future in the handset market was cast into major doubt following major cuts to the UK team and claims from former staff that a decision to exit by Christmas had already been made.

Tough market

However, Williams wouldn’t be drawn on whether this presented opportunities for HTC, and even went some way to defending his rivals for the difficulties they have encountered due to the increasingly competitive market, backing them to come through relatively unscathed.

“This is a tough market for everyone,” he says. “Is this as good a time as any of us to make a real impact in the market? I don’t know. We will adapt to that.

“I have been through those situations and you don’t wish them on anyone because it is extremely tough. We’ll play our game, do the basics right and see where that takes us.

“Over a period of time, you are building things on a solid foundation because you are doing those basics right. If you have time, which we do, although it isn’t decades, you have some breathing space.

“With the next quarterly stock price, I don’t feel that as much at HTC but at the same time looking at the optimism and talking to my team, we want to show progress and those small wins. They mean a lot because it isn’t all doom and gloom.

“You have to take the tough stuff and point out the good stuff. It might be two steps forward and one step back but tomorrow you can repeat the same process, and that’s the mentality to take.”

The U Play and U Ultra smartphones were unveiled at the start of the year

Healthy roadmap

Despite troubled times for HTC over the last few years, Williams is confident the business is now heading in the right direction and says customers and the industry as a whole will hear a lot more from it in 2017.

He claims the manufacturer has a healthy roadmap with plenty of money to spend in the necessary areas, with the team in Slough now beginning to feel more optimistic about the future.

“We have cash in the bank, we’re not losing hundreds of millions of pounds and we have a portfolio with really good innovation coming. That is very different to some of the other players.

“Yes we have gone through some restructures, which others will have to do at some point – that’s a fact in our industry. People look and ask what else we needed to do – we needed to get our investments into the right places.

“It’s not like we have a magic bucket of cash that we haven’t been using, you just have to make sure the cash you have in reserve is used in a very targeted way. We’re quite targeted in what we do – in digital channels [and] making sure people can find out about us.

“In 2017, I want the team to be optimistic and forward-thinking. There is a lot of tough things going on but everyday it is two steps forward and perhaps one step back but the progress is there, and we will continue to head in that direction.”

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