HTC Worth Less to Investors than Cash on Hand

What was once the most popular Android manufacture in the world, HTC’s market price has now fallen below the value of its own cash reserves of roughly $1.4 billion. According to Calvin Huang of Sinopac Financial Holdings Co. in Taipei, “HTC’s cash is the only asset of value to shareholders. Most of the other assets shouldn’t be considered in their valuation because there’s more write-offs to come and the brand has no value.”

HTC’s fall has been rather swift. Back in 2011, the company was valued at $28 billion, but in the past four years it has been unable to compete against Samsung or a flood of upstart China brands. Now it’s hanging on to a fraction of its former market share, and it’s forecasting third quarter sales could fall a further 48 percent. Inventory has jumped 60 percent, which further highlights the company’s problems in moving product.

With only two percent of the global smartphone market today, it would be natural to fault HTC for such a major free fall; however, a deeper look into the market reveals that may not be the case. The predominant strategy in Android has been to churn out as many types of devices as possible in the hope that one of them will appeal to some niche of customer. Whether or not that niche exists is irrelevant. Samsung, for example, released 56 devices just in 2014. While the R&D, validation, marketing, and distribution costs for any given device are small comparative to total net revenue, the sheer number of them eventually adds up to a massive amount of money, killing profit margins. LG’s for example, comes out to 1.2 cents per phone.

According to HTC’s 2015 Q2 summary, the company has begun to implement company-wide efficiency measures to reduce operating costs across the organization and ensure resources are appropriately allocated to future growth. HTC also stated that it will continue to invest in new product areas such as virtual reality, where it’s working with over a thousand developers on content creation over a wide spectrum of applications including gaming, entertainment and education, to ensure a compelling ecosystem ahead of the highly anticipated launch of HTC Vive at the end of the year.