Technology

Is Google's phone HTC's best shot?

World's No. 4 smartphone manufacturer grabs spotlight as maker of the Nexus One.

The launch of its Nexus One ‘superphone’ at the Consumer Electronics Show in mid-January was a big deal for Google — but it’s just as significant for the device’s manufacturer, HTC. Founded in 1997, Taiwan-based HTC spent most of its existence as a stealthily successful original design manufacturer, supplying phones to other manufacturers and mobile carriers and embodying their tag line, ‘Quietly Brilliant.’

But now, four years into producing devices under its own brand, and in the midst of its first-ever global advertising campaign, HTC just announced a sixth straight quarterly profit decline. The Nexus One is just part of the repositioning intended to restore its industry-darling status in 2010.

Mention HTC’s name to the average North American and you’ll likely draw a blank stare; but what the company lacks in brand firepower, it has traditionally made up in results. One in every six smartphones sold in the United States last year was made by HTC, and the company entered 2010 as the world’s fourth-largest smartphone manufacturer, behind only Nokia, Research In Motion and Apple.

Much of that success has been due to Microsoft’s patronage. HTC made the first phone to use Microsoft’s Windows Mobile platform, which helped it earn top spot on BusinessWeek‘s list of 2005’s fastest-growing tech companies.

But demand has eroded in the face of competition from other platforms — bad news for HTC, for whom Windows Mobile smartphones made up more than 90% of 2008 sales. The company anticipated the challenge. When Google founded the Open Handset Alliance in 2007, promoting open standards for mobile devices, HTC was among the first to sign on, and was chosen to make the G1 smartphone that introduced the world to Google’s Android mobile software platform 14 months ago. That laid the basis for the companies’ partnership. The media frenzy over the Nexus One obscured HTC’s disappointing fourth-quarter results, released the next day. However, the trouble may be temporary. Chialin Lu, a Taiwan-based senior analyst for Macquarie Securities, pins the latest earnings drop on the cost of its current global advertising efforts. ‘I view this as an investment to increase brand equity rather than just an expense,’ says Lu, whose house retains a positive outlook on HTC for 2010.

In fact, another of HTC’s announcements last week may in the long run prove even more important to the company than the Nexus One. Two days after the Google announcement came the unveiling of the HTC Smart. Less powerful than high-end devices like the Nexus One or the iPhone, the Smart will be the first non-smartphone to offer HTC’s Sense user interface. The result is an affordable take on the smartphone that HTC hopes will prove a mass-market hit.

‘The smartphone space is growing incredibly,’ says HTC’s senior public-relations manager, Keith Nowak. ‘About half the people who’ll be buying a new phone [this year] are planning on getting a smartphone.’ HTC hopes that the strategy behind the Smart will put them in the catbird seat for the ‘smartphones for everyone’ stage that Lu expects the mobile market to enter in the next two to three years. If they’re right, there’ll be nothing quiet about the results.