Acquisitions - The Key to HTC's Rapid Growth. From Digitcom.ca

Since the launch of its own brand of phones in 2006, Taiwan based HTC Corp has managed to become the 5th biggest smartphone manufacturer in the world by volume. Previously the company contract manufactured mobile phones for other brands. With the aim of increasing its market share and improving its patent profile, over the past year the company has spent over $700 million on acquiring small firms. In spite of the expenditure, the company remains keen on buying.

Reports from Gartner Inc. indicate that over the past year, Android Operating System’s market share has almost doubled and it currently accounts for almost 43% of the mobile market. The report deemed Apple’s iOS as the second most popular mobile software as of the 2nd quarter of 2011.

Early adoption of search engine giant Google’s open source Android software has enabled HTC to give tough competition of consumer electronic giants like Samsung and Apple. With former market leaders like Nokia and RIM (Research in Motion) losing their market share, the company’s position has strengthened further. A study by ARC Chart research firm indicates that HTC handsets account for 53% of Android devices in Canada and the US.

According to the company Chief Executive Peter Chou, acquisitions have enabled HTC, an engineering centric firm, to rapidly increase its offerings and capabilities in areas such as marketing, content and design, which is vital for differentiating its products from others. HTC seems to be keen on expanding in the US market. The company has spent $300 million over S3 Graphics, a graphics maker based in the US, in the hopes of winning patent protection against a court case with Apple. In order to boost its appeal in the US market, the company has acquired 51% stake in music producer Dr. Dre’s headphone making firm Beat Electronics LLC for $309 million.

In the first half of the year, HTC acquired UK based streaming content firm Saffron Digital for $48.6 million, invested $40 million in the US based streaming video game firm Onlive Inc. and $10 million in KKBox, an online streaming music firm based in Taiwan. More recently, HTC announced the plans of taking over California based firm Inquisitive Minds, which developed child-focused software, for $13 million.

According to Cher Wang, HTC chairwoman and co-founder, the takeover of Beat Electronics and S3 Graphics are just the start. With the Silicon Valley offering so many innovations, the company is keen on acquiring many more small firms. HTC reported $4.48 billion revenue and $615.3 million net profit in the 3rd quarter, which is almost double the last year’s figure.

But the company has a tough road ahead with competitors like Samsung and Apple. With Samsung’s high vertical integration and Apple’s trendy products, reaching the no.1 position in the smartphone market will not be easy for HTC. Moreover, the company is dependent on Google and Microsoft operating systems for its devices. In case these companies decide to make an entry in the hardware sector, they can seriously threaten the company’s position. HTC is also involved a number of patent lawsuits against Apple that can result in costly licensing fees and restrict the company from releasing its products in the US market.

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Written by: Yuyutsu Sen. www.digitcom.ca.

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