How Will HTC's Problems Affect Google?

 | Dec 20, 2011 | 10:00 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:










Quick question: Who has the worst stock performance in the last six months: Apple (AAPL), Google (GOOG), Nokia (NOK), Research In Motion (RIMM), or HTC Corp.?

It's actually HTC, whose stock has declined by 52% over that period. Comparatively, Research In Motion is down 51%, Nokia is down 25%, Apple is up 19% and Google is up 28%.

We tend not to pay as much attention to HTC, as it doesn't trade in the U.S. (only in Taipei). However, it has been difficult not to notice HTC's brand in the U.S. these days, as it's arguably the face of Google's Android smartphones -- though it is battling for that honor with Samsung.

HTC really embraced Android very early on and transformed itself from being seen as a cheap feature-phone maker from Taiwan to one of the leading smartphone makers who was consistently innovating in its latest phones.

As its newer Android phones were embraced, its stock price rose. In 2010, HTC's stock price rose 148% for the year. Yet, it's given back most of those gains this year.

The reason for the stock's reversal has primarily been due to HTC becoming a favorite target of Microsoft (MSFT)and Apple as the public face of Android's patent infringement. Unlike Google, HTC has much fewer patents and less cash to defend itself against these bigger legal foes.

HTC was quick to cut a deal with Microsoft early on to pay a hefty $5 per handset. It's been a longer road with Apple and it's not clear when or where the road will end.

Just yesterday, Apple achieved a ban of some HTC models in the U.S. starting in April (unless HTC and Google put their heads together and figure out a work-around).

Of course, one of the biggest things hitting the stock recently has been the two earnings warnings -- in three weeks. That's downright reminiscent of RIM. It also raises a lot of questions about management's handle on what's happening in their business.

I was able to hear HTC's founder and CEO, Cher Wang, speak back in October at the Asia D conference in Hong Kong. She was extremely boring and uninspiring as a speaker. She gave little indication of some secret sauce at HTC or how they were going to succeed better than their competitors. In summary, her recipe was (1) work hard and (2) innovate. Got that?

What's most interesting about what's going on at HTC is if it represents some kind of canary in the coal mine for Google's Android platform.

Was this just an HTC problem of stuffing the channel? Or does it seem to be affecting other Android vendors? No one else comes across so far, although RIM certainly seems to be having volume issues, too. Apple, so far, does not appear to be facing these issues.

What is going on here? We probably won't know for another couple of quarters. But it's worth watching closely.

Columnist Conversations

Now that AAPL has violated the shorter term support, these are the two areas I have to consider for new buy en...
The symmetry is holding up in MCD.  Target 1 is 163.34 if we continue to hold above here!  ...
As far as TSLA is concerned, I still have a higher target above the market at the 409 area.  I stated in ...
The TLT setup discussed in my last commentary is a bust. Key support was violated and it violated the recent l...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.