HTC warned of becoming hardware assembler post poor investments

After failed investments in Beats Audio and now OnLive, HTC risks turning into a pure handset assembler rather than an ‘end-to-end solutions provider’. HTC lost $40 million in its investment on OnLive and had earlier taken a loss of about $5 million on its Beats Audio investment. These failures could translate into HTC’s difficulties in differentiating its products from competition that would erode the value of its smartphones.
“With the failure of its investment in Beats and now OnLive, we see more evidence that HTC is becoming a pure hardware assembly company. Yet, as we have pointed out before, HTC’s cost structure is too high compared with many other low-cost makers; we are concerned about its margin outlook,” according to a note by Daniel Chang, a Macquarie Capital Securities’ Taiwan Branch analyst.
In other words, HTC could find itself stuck between a rock and a hard place next year as its smartphones might not be able to compete with top-tier smartphone vendor like Samsung on software and additional features while lower tier vendors like Huawei and ZTE undercut its smartphones on price.
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