HTC Finds Itself Locked Out of Windows 8 Launch

HTC, which was the first smartphone maker to introduce a device running Google’s Android OS, has been denied the chance to make the first tablets running Microsoft Windows 8 because sales of HTC mobile products are weak.

HTC, the Taiwanese electronics company, has been denied the opportunity to release some of the first tablets running Microsoft€™s Windows 8 because its sales have weakened.

Bloomberg News reported on the Microsoft decision June 6, the same day Taiwan-based HTC reported its second quarter revenue would be off by 13 percent after its first quarter revenue tumbled by 35 percent from the year ago quarter. It also didn€™t help that HTC shipments to the United States were held up by U.S. Customs for two weeks last month before HTC was cleared of patent infringement allegations by Apple.

Microsoft told Bloomberg that HTC is a strong partner now and for the future, without commenting specifically on its relationship with HTC. The company could still make Windows 8 tablets, but it wouldn€™t be in the first batch of machines to reach the market. Microsoft is actually rolling out two operating systems, Windows 8 for x86 processor devices and Windows RT for devices with ARM processors.

In the first quarter of 2012, IDC estimates that HTC shipped fewer than 35,000 tablets worldwide, which is €œwell under 1 percent of the worldwide media tablet market that quarter,€ stated Tom Mainelli, research director for Mobile Connected Devices research at IDC, in an email.

Ramon Llamas is an analyst at IDC who follows the smartphone market, not tablets, but some of the problems HTC is having in smartphones are similar. HTC€™s smartphone sales fell by 23 percent in the first quarter of 2012 from the year ago quarter. HTC has suffered supply chain headaches because it gets its chips from the same chipmaker, Qualcomm, which supplies Apple and Samsung devices, the top two sellers.

€œChip manufacturers will serve a customer like HTC after they serve Samsung and Apple. HTC hasn€™t been in the position to command that kind of volume and attention,€ Llamas said.

HTC has also introduced new smartphone models that flopped, he added, such as the HTC Rhyme, which was targeted at women but missed its mark. The HTC Salsa was billed as €œthe Facebook phone,€ but you can access Facebook on any smartphone. The same goes for the HTC Resound, touted for its music-playing capabilities.

Overall, tablet sales tracked by IDC actually slipped in the first quarter of 2012 to 17.4 million units globally, 1.2 million units below an IDC projection and 38.4 percent below sales for the fourth quarter of 2011. However, they were up 120 percent from the first quarter of 2011. IDC counts e-readers such as the Amazon Kindle Fire and the Barnes & Noble Nook in the tablet space.

Sales of Android-powered tablets, such as those from HTC, declined the most in the first quarter. Apple iPad sales also slipped but its market share rose to 68 percent from 54.7 percent in the fourth quarter of 2011. While IDC didn€™t provide specific sales figures for specific Android tablet brands, it did note that €œcompanies such as Samsung and Lenovo are beginning to gain traction in the market with their latest generation of Android products.€

But with the introduction of Windows 8 tablets, expected in the fall, "the worldwide tablet market is entering a new phase in the second half of 2012 that will undoubtedly reshape the competitive landscape," said Bob O'Donnell, program vice president, for client devices and displays research at IDC, in a statement.

Though the specific impact of Windows 8 can€™t yet be determined, in part because pricing of the tablets hasn€™t been announced, the new OS, along with new Intel-powered Ultrabooks€“thin and light notebook models€“coming to market, and the continued strength of Apple iPad, will all shake up the market, O€™Donnell said.

These are all developments that HTC has to be able to keep up with.