HTC built its business on Microsoft’s mobile operating system before making a big bet on Android, and for a while the mobile phone company experienced serious success with that strategy. But this year HTC has slipped, posting disappointing profits in the face of stiff competition from Samsung on Android. Meanwhile, Microsoft has been strengthening its ties to Nokia as the flagship maker of Windows Phones.
And yet the mood inside HTC is as optimistic as ever, says Jason Mackenzie, the company’s president of global sales and marketing. In an interview with GeekWire at the company’s North American headquarters just outside of Seattle this week, Mackenzie acknowledged the challenges and explained how HTC is adjusting its strategy in an attempt to compete more effectively with its larger rivals.
He talked about HTC’s relationship with the major wireless carriers, its efforts to unify its products behind the HTC One lineup, and addressed a question about the recent jury verdict in the Apple vs. Samsung patent case. He also touched on HTC’s tablet ambitions and outlined the company’s approach for Windows Phone 8. (HTC has scheduled a news conference for Sept. 19 where it’s expected to unveil new devices.)
Continue reading for excerpts from the interview.
It seemed like HTC was really riding high and now things have slipped. Is that an accurate perception?
We’ve definitely had some challenges, going through some growing pains over the last year. We’ve had really tremendous growth, not just in our business but also in the organization to support the business. The market changed a little bit in the sense that these OEM big brands mean a lot more — consumers are really thinking about their EVO or their Galaxy or their iPhone. We needed to consolidate the portfolio, be a little crisper in our marketing message and come up with HTC’s flagship brand. We launched the HTC One but probably a couple years later than we should have, admittedly. But even with all of that, things are not that bad for us. The fundamentals are there in terms of great products. What we’ve done is we’ve relied a little bit on this “quietly brilliant” mentality to our detriment and not been so aggressive in going and telling our story as this challenger brand doing great things, and as a result have let some of that negativity fester and build upon itself. And I think that was a mistake.
With the HTC One launch, you’ve gotten traction with T-Mobile and AT&T, and yet Verizon hasn’t yet embraced it. What’s going on there and do you hope to get them on board?
Absolutely. I think some of that is not Verizon’s problem. A little bit of it is HTC in terms of the planning around HTC One. We’re selling in these products a year to 15 months ahead of time. The marketing plans sometimes are not all being baked right at the product inception. It just worked out differently where we built the HTC One around a great product franchise, where the sales were already done in terms our selling those products in to certain carriers. Our strategy is definitely to have HTC One products across all of the carriers, from Verizon to US Cellular or Bluegrass Cellular. That’s our goal.
Why is that important, particularly when you think about Android devices and the Android landscape, to have that consistency across those various carriers?
A couple reasons. No. 1, as HTC, we’re one of the top 3 smartphone manufacturers in the world. But if you look at those other two, they’re massive. They’re huge. We’re battling two of the largest companies in the world in Samsung and Apple. That’s a big job. Fortunately we have a lot of innovation that helps differentiate us and really makes HTC relevant. The challenge that we have, though, is the resources. From a marketing resources standpoint, I can’t do brute-force advertising, for example, like some of our competitors. So we have to be very smart about that and be very efficient with where our dollars are going. To answer your question, it’s important that I have one product franchise that I can drive messaging around and be really clear about what that franchise is, and why it’s valuable and how it’s differentiated, that helps me be a lot more efficient with our resources, to be able to compete with our core competitors.
It seems like it’s to the carriers’ advantage to have different models, so that direct comparisons of the HTC devices on T-Mobile, AT&T and Verizon are harder for the consumer to make. How do you overcome that?
It’s true, because the carriers are looking for as much differentiation as possible to drive doorswings into their retail shops. But the way I see it, the world is also changing. The consumer drives everything at the end of the day. The consumers are rallying behind these franchises that are largely driven by the OEM. When I started in 2005, we had a core philosophy as HTC that was really, our phones, your brand. I can remember going in and selling — at T-Mobile across the street or at AT&T in Redmond — this idea that, hey, you should really partner with HTC because I’m not going to fight with you on the real estate of the hardware. We can make this product, this MyTouch, an extension of T-Mobile’s brand. At that point the strategy made a lot of sense because when we looked at surveys and data, and just talked to people, more often than not it was, oh, I have a Verizon phone. I have an AT&T phone. With us building up that business, we needed to build up an ecosystem of partners, and that was it. But the world has changed. Now, people are not leading with Verizon or Sprint in terms of their hardware, it’s really the hardware manufacturer. I have an HTC EVO, or I have an iPhone or a Galaxy. The world changed for sure, and I think to Apple’s credit, the iPhone had a lot to do with that.
I remain extremely optimistic about HTC, as does everybody in the office. Our employees are more passionate than ever. The biggest reason is the product. At the end of the day, we live in a product world. If you’re not delivering great products, there’s not enough makeup in the world that’s going to allow you to sell millions of the product. And we have great products. We don’t sit back and say, “OK, Microsoft, give me the latest drop, I’m going to integrate that on my hardware and go,” or “Google, let me have Android.” We’re really working in cohesion with them to understand the platform very clearly and then look at consumer behavior and where we can add value, to where an HTC experience is so much better than another Android phone. And we’ve been able to build some equity around that with Sense. The No. 1 reason that I remain confident that HTC will stay in this upper echelon of smartphone manufacturers is because our products are great, and not just from a hardware perspective, but also we’ve been able to change from just a hardware manufacturer to be really strong in the area of software, as well, and have buit out a very strong differentiated experience. Our portfolio of products is rich, not just on the Android side, but also on the Windows side.
One of the reasons we’re sitting here, about five miles down the road from Redmond, is that HTC’s roots in North America were as a Windows Mobile device maker back in the day. What’s the relationship like with Microsoft, because I could see them being frustrated that you’ve gone so hard-core into Android.
I think frustrated, but they also understand. When you look at HTC, we’ve been doing Windows Phones longer than anybody. I joke about this but I think it’s probably true — we have probably the longest-tenured Windows Phone engineering team of anybody, including Microsoft. Because we haven’t had that turnover. If you look at Peter (Chou, HTC CEO) driving this team, there’s been a few different heads of Windows Phone in that timeframe, and the one constant in that timeframe is HTC. We’ve been very open not just with Microsoft but with our customers — we’re committed to Windows Phone. We were born with Microsoft on the Windows Phone side, and really driving and being fast there. If you look at every release since the beginning, HTC has had product out there. Now, if you look at the last couple, we haven’t invested as much as one competitor, in terms of Nokia. But we’ve been constant in trying to put out good products. The way we’re looking at it in terms of Windows 8 is that’s a big opportunity for us to leverage our heritage, our experience on the platform and do some really cool stuff that I think is going to stand out big time for the holidays this year.
It’s huge. I think the way we look at it is, in technology and maybe in consumer products, this is going to be the biggest story out there, in terms of Windows 8. It’s just going to be so massive.
Windows 8 or Windows Phone 8?
Windows 8 and then Phone 8 as a part of that. For us, and for the Windows Phone community, it’s huge in the sense that it opens up a broader ecosystem — this whole family experience that Microsoft has been talking about. Huge milestone, a great opportunity for HTC to leverage our past with Microsoft and some of the things we’ve done on products. Obviously it’s been an uphill battle for Windows Phone. We love the platform, though — we think it’s a great user experience. The rate of exchanges from customers is very low on our Windows Phone stuff, and talking to Microsoft they see that across the board. It’s one of those things where, when people pick it up and use it, they love it, and don’t let go of it. The challenge has primarily been around communicating that, and getting people to try it. There’s a number of reasons for that. A lot of it is ecosystem, I believe, in terms of so much momentum behind iOS and Android, and apps and everything. I know Microsoft has been going big on that.
The other thing we see, and where we think it’s a big opportunity for HTC: The designs to date on Windows Phone, compared to some of these other platforms, they look like the JV designs.
What do you mean by that?
You’ve got companies like Samsung and even HTC who have been really giving our best designs to Android.
The varsity designs? Is that what you’re saying?
Yeah. … Because of that, I think the prices (for Windows Phone) have skewed very low, and when you look at a customer going into a shop, it’s very clear what the top-tier products are today. They’re usually $199. You don’t have products there that have really been able to command that price point. When we look at that landscape, we see that Microsoft is going to do a lot of heavy lifting on the ecosystem, the apps and all that. What do we do, how can we be innovative? Peter basically took our designers and said, look, go to the whiteboard, let’s start over, we want to build a design that is clearly Windows Phone for HTC. Totally beautiful, superphone quality, etc. That’s what we’ve been working on, and that’s what we see as our opportunity for HTC to differentiate even further from the other products.
Samsung’s announcement (of the Ativ S Windows Phone) is a good example of that. It’s a version of the Galaxy S III. But what we’ve really done is try to make a unique design that’s fresh, smart and really stands out. And so far the response has been phenomenal from our partners to Microsoft, as well.
So that’s what we’ll see when we see your Windows Phone 8 devices come out?
That’s what you should expect from us, is really our best.
Are you planning to make Windows 8 tablets or Android tablets?
We launched a tablet in the past, the HTC Flyer, with pen technology that now we’re starting to see others adopt, too. We haven’t put out another release. Today, the landscape is you have a couple really successful tablets and then a whole bunch. We’ve been really focused on how do we differentiate and add tremendous value. Our intent is that we will support tablets on a continued basis. We just want to make sure that when we do one, it’s not, ‘me too.’
Have you decided whether you’re going the Android or the Windows route?
We haven’t made any announcements on that, so I’ll pass on that.
The jury’s decision in the Apple vs. Samsung patent case: Has that changed how HTC views the world or how it’s looking ahead to its future products, even just over the past couple weeks?
It hasn’t changed how we’re looking at our products, because we don’t copy. HTC is an innovator, a pioneer in this business, in helping to really drive smartphones forward. So from that perspective, no. It’s something we have to take seriously, and our legal teams are taking it seriously, but it doesn’t consume us, it doesn’t change the way we innovate. We feel confident, and we don’t copy. When you look at our designs, they’re differentiated.