HTC 2012 Annual Report Download - page 22

Analysis of Business Results
2012 saw the most competitive year yet for smartphones, with two companies
dominating the revenue and profit charts across the globe. HTC remained the
only other major company to stay profitable with the global launch of the HTC
One family in April. This new franchise offered a 3-tiered product positioning
strategy for premium quality smartphones. The HTC One X was rated higher
than its Android flagship rivals throughout 2012 by industry experts and
cemented Amazing Camera and Authentic Sound as two of the major selling
features of smartphones across the category. Value offerings were marketed
under the HTC Desire range. These products were targeted at consumers
buying their first smartphone or seeking powerful value from a smartphone
expert. In the autumn, we launched our colorful Windows-based HTC 8X and
8S to address another segment of consumer who admired the appeal of an
OS that worked across all device platforms or perhaps was more familiar with
a PC environment. Despite heavy competition in the more mature markets,
HTC's growth in China and competitive portfolio across price points ensured
a sturdy performance of NT$289.02 billion in revenue, generating NT$72.93
billion of gross profit .
Average smartphone prices did reflect some strong shifts in product mix
within the category and also the rapid rise in geographical importance of
lower priced markets in Asia, with China becoming not only the world's
largest market but also it's fastest growing in 2012. Amidst this fierce category
competition, we took the opportunity to look closely at optimizing our
investment base. We grew our brand awareness amongst smartphone owners
to over 80% across the globe and after six months of marketing the HTC One
franchise it was recognized by nearly half all smartphone purchasers (Hall and
Partners) . HTC is the third most considered brand after Samsung and Apple.
Overall, HTC's consolidated selling and marketing expense in 2012 declined to
NT$32.4 billion, down 19% from 2011. Consolidated operating expenses for the
year totaled NT$54.1 billion. Benefitting from close cost management, HTC's
consolidated operating expense ratio moved by just 5.2 percentage points
for the year to 18.7%, which drove the consolidated operating profit margin
(OPM) to 6.51%. Amidst this difficult trading picture, earnings per share (EPS)
remained positive at NT$20.17.
Brand Strategy
HTC has continued to stand its ground as a brand that puts the consumer
at the centre of the smartphone experience. The HTC One family broke
new ground with the Amazing Camera innovations, Authentic Sound and
an all-new simplified HTC Sense experience that scored industry leading
customer delight scores. Our brand is most appreciated by younger,
adventurous consumers who like to feel independent, respected and free to
do things their way. They are always seeking something new and different
and HTC appeals to them as being pioneers, always looking to innovate to
a better solution, an authentic brand and a company that has let its actions
speak louder than words or marketing budgets. Being quietly brilliant as a
company and within our culture attracts their respect and loyalty. However,
in 2012 both Apple and Samsung saw an increase in their advertising
budgets of over 300% in some markets – so it is now necessary for HTC
to approach the market in a more assertive manner, boldly protecting our
innovation and establishing our unique experiences clearly with this more
progressive consumer. While retaining our authentic nature and sense of
playfulness, HTC will become more strident in offering the consumer a real
alternative to the mainstream brands that no longer delight in innovation
or breakthrough designs. At this time in the category we stand out as
being the third-most desired brand, the brand that most consumers think
will buy for their next mobile phone after Samsung and Apple and the
brand that most 18 – 29 year old consumers think is "on the way up" (Hall &
Partners 2013) Our flagship device for launch in Spring 2013 is the new HTC
One. It features three major new innovations in camera, sound and home-
screen experiences, contained in the first all-metal design. The new HTC
One camera and sound have truly transformed consumer experiences in
entertainment. Our product design also has surpassed the uninteresting,
incremental changes that other so-called market leaders were able to
bring to market. We have invented a new way to manage your favourite
content so that it is both fresh and stimulating every time you pick up your
phone. We have also made the basic tasks like switching to an HTC phone
from a leading brand or syncing with a PC very simple to do. This is putting
the consumer at the centre, celebrating the smartphone as your most
3
BUSINESS OPERATIONS
0
4
0
3
BUSINESS OPERATIONS
0
4
1