Why You Shouldn't Count HTC Out Yet

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Earlier this week, embattled technology manufacturer HTC released its 2016 Q1 earnings. The numbers were unfortunately, but not surprisingly, disastrous. After a dismal campaign in 2015 that saw the company’s revenue drop from NT $41.5 billion ($1.29 billion USD) in Q1 to just NT $25.7 billion ($789.5 million USD) in Q4, HTC opened the new year by dropping even further to NT $14.8 billion ($460 million USD).

That makes for a massive 64 percent drop in revenue from Q1 2015 to Q1 2016. Profits fared even worse dropping 78 percent year-over-year. Given its poor performance a year ago, HTC needed to rebound in a big way in 2016. The early numbers are not promising, but they were never expected to be. The biggest moves the company made in response to the poor reception and commercial performance of the One M9 and A9 are not included in the Q1 report. Certainly, the hill to climb is still large and the company is not expected to become Apple in the next seven months, but it has made smart and interesting moves this year.

If you’re ready to write HTC off, you should step back from the ledge. We won’t know if the right moves were made until the curtain’s close on 2016, but the company has offered good reason not to count them out yet.

As it always has, HTC’s potential rebound starts with its smartphone portfolio. The company had much to atone for after last year’s misguided flagship, the One M9 and uninspired mid-range offering, the One A9. In an age where the biggest tech companies can largely ignore complaints from its user base and still perform well, HTC understood it needed to listen to the criticism that surrounded its highest profiles phones from last year. With the HTC 10, the company not only addressed the concerns of the M9, but delivered its best smartphone to date.

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In every category, the 10 performs admirably. Like all great HTC phones, the hardware is phenomenal, the care given to build quality is apparent and the company’s claims that it obsessed over the making of the 10 ring true once you hold the phone and feel its solid construction. The design is a maturation of the signature One series look, despite the One moniker having been removed. It shares DNA mostly with the original One (M7), adding a bit of flair with dramatically chamfered edges that frame the back of the phone in a distinct way.

Software is fast, fluid and closer to stock Android than ever. HTC seems to have put less focus on developing Sense, new features are slim, but there are a few minor highlights. First is the Freestyle Layout option that removes the usual grid system and lets users apply a theme and wholly customize the look and second is audio software that pairs with 24-bit sound processing, a built-in DAC and high performance headset amplifier to offer some of the best sound you’ll find on a smartphone.

It’s very easy to get swept up in how great a phone the HTC 10 is but, to keep from writing another review on the topic, I’ll finish with a quick note on the camera. The company had been lambasted for years because of poor performing cameras, but the 10 has changed the conversation. It is the best performing camera HTC has ever put in a phone, absolutely competitive with the best on the market and has even been updated since our original review to address some of our main concerns (particularly the color accuracy and saturation).

The 10 is a great package. It’s one of the best phones you can buy on the market right now and, if you’re at the end of your contract or looking for a change, it deserves serious consideration. It’s particularly promising when you add the rumors that HTC will helm the 2016 Nexus phones. Given how solid a machine the 10 is, Google could be on the verge of releasing its best Nexus phones ever, only a year after it did just that with the Nexus 6P.

Nexus phones aren’t made to sell massive units, however, and there is still a clear lack in marketing power on the side of HTC. That means the 10, and possible future Nexus devices, likely won’t sell in huge numbers. HTC says the launch for the 10 has been strong, but it’s hard to know what “strong” means to a company that just reported an 80 percent drop in profits. The team-up with Google could help on the marketing front. Mountain View pushed big campaigns for the 6P and 5X last fall and would likely do the same for the HTC phones.

Even if the 10 and Nexus phones don’t set sales records, they will likely outperform HTC’s 2015 offerings. Like any struggling entity, HTC has to look at the road ahead in manageable chunks. One quarter, one device, one day at a time. It can’t try to reclaim its former glory in one fell swoop. The good news is that the 10 proves it’s not trying to do that. HTC is simply trying to regain some momentum by putting its best foot forward, and that outlook could lead to a healthy 2016.

On the devil’s advocate side of things, one could argue the smartphone market is all but set in stone. Apple and Samsung are the pillars and always will be. At this point, it’s a tough market for a new company, or an established company hoping to rebound, to make any headway. That’s why the second big launch HTC had in Q2 may be even more important than its flagship smartphone.

For years, the biggest name in virtual reality was Oculus. Other companies came through and announced they were working on a VR platform, but all eyes were still on the Rift. HTC was one of those companies when it surprised the tech world and revealed it had partnered with lauded videogame company Valve and was working on its own VR platform, Vive.

Perhaps even more surprising is that Vive not only holds its own against the Rift, but is in many ways a better experience. HTC’s headset launched to strong reception, with many reviewers noting its superior immersion over the Oculus Rift. Many people believe virtual reality, augmented reality and mixed reality are the next big step in technology and the fact that HTC is in on the ground floor with arguably the best first option for VR is a big coup for the company.

Vive won’t save HTC, though. At least not in 2016. It’s still a niche product for early adopters that comes with a big price tag of $800, plus the cost of a gaming PC or upgrades you might have to make to your current rig to support VR. The future potential is what’s important here. If VR does breakthrough to the mainstream, it could become the pillar of HTC’s business for years to come, especially if it is able to progress Vive’s technology at a rate equal to, or better, than VR competitors. It will be tough, particularly given the resources Oculus has with Facebook’s deep, deep pockets but HTC is at a good starting point.

Being on the front lines is good, but it’s not everything, and the company knows that. It was once on the front lines of the Android platform, and quickly became the biggest Android manufacturer, but we know how that’s ended up. HTC needs to learn from its smartphone struggles and continue to build a great product with Vive, but also figure out a way to market it more successfully. It doesn’t matter if you make a great product if no one, meaning the average consumer, has any idea it exists.

Dropping 64 percent in revenue and 78 percent in profits is a huge knock , but likely one HTC saw coming. It knew it had to hit with something brilliant in the second quarter, and it did. Twice. Both the 10 and Vive are leading devices in their respective platforms, and should give the company a boost. Granted, just about anything would be a boost given current standing, but the company has shown a desire to continue to put its best foot forward despite dire circumstances, which it should be given ample credit for.

This year remains huge for HTC. It won’t regain former glory, but could find new splendor in the world of VR and has already found solid footing in its smartphone brand, possibly strengthened even further in the second half of the year if it does take on the latest Nexus devices. There is a lot to be gloomy about when considering the fate of HTC, but not all is lost. Before you write off the Taiwanese company completely, wait to see how it performs in Q2. If the numbers are anything like Q1, it may be time to wave goodbye to the once great tech manufacturer. But the company’s recent product history tells me HTC is primed for a rebound.

We all love an underdog, right?

Why You Shouldn’t Count HTC Out Yet