HTC Finishes Q3 in the Red, Eyed by Microsoft for a New Deal

HTC, after quarters of decline, finished Q3 in the red. According to a report, Microsoft is courting HTC to create dual-OS smartphones.

Smartphone maker HTC posted a net loss of approximately $101 million during its 2013 fiscal third quarter, it announced Oct. 4.

The company has struggled to compete against the Apple iPhone and Samsung's popular Galaxy lineup.

Reuters reported that according to interviews conducted with HTC executives, the "abrasive management style and weak strategic vision" of CEO Peter Chou is thought to have also played a role in the company's decline.

The third quarter was the company's first to finish in the red.

While Chou declined to be interviewed, the company told Reuters in a statement, "HTC's board and broad employee base remain committed to Peter Chou's leadership. The HTC One product family—which has been met with accolades by media and consumers alike—was a result of Peter's vision and leadership, and speaks for itself."

Investment firm Canaccord Genuity reported Oct. 4 that its September store surveys "indicated very weak HTC One smartphone sales due to very strong iPhone 5S and 5C demand, combined with the Samsung Galaxy S 4 maintaining its top position in the high-end Android smartphone market."

The firm added that it believes HTC's sell-through in the U.S. market could "further deteriorate" in October.

What's HTC to Do?

HTC has worked to boost its smartphone market share by reinventing its marketing efforts.

In late 2012, it brought in a new head of marketing, earlier this year it ditched its Quietly Brilliant tag line, and this summer it signed on actor Robert Downey Jr.—to a reported two-year deal—for a series of commercials that play on what the three-letter HTC acronym stands for. (Hold this cat? Happy telephone company? Here's to change?)

HTC has also tried shifting its focus away from the United States and more on to Asian and European markets—an approach that Chou announced in April 2012. This August, The Wall Street Journal reported that HTC still had an eye on the potential of the Chinese market and is preparing a proprietary operating system for China.

The Chinese government has been outspoken about its fears of so many Chinese users relying on the Android operating system, which is run by the majority of HTC devices.

In a highly competitive marketplace, HTC may find the help it needs, as its rivals have, in a partner. Google bought Motorola, Microsoft is buying Nokia, and BlackBerry has grabbed for a private life preserver.

HTC has released a limited number of smartphones running Microsoft's Windows Phone OS, but the devices received little attention. Still, Microsoft may offer a way for HTC to better differentiate itself.

Bloomberg reported Oct. 4 that Terry Myerson, head of Microsoft's operating system unit, plans to visit Taiwan this month to meet with HTC senior executives about a proposed plan to load Windows Phone onto Android-running handsets, as a second OS option.

"Myerson discussed cutting or eliminating the license fee to make the idea more attractive," Bloomberg reported.

During the same quarter in 2012, HTC announced total revenue of $2.4 billion—a fall of 80 percent from its 2011 third-quarter— and a net income before tax of $137 million, representing a 50 percent loss from the year before.

Chou told employees in an email last October that the company needed to act quickly, "kill bureaucracy" and "stay firm with the hero innovations."