Oh, how the mighty have fallen. HTC, an early champion among Android manufacturers, is in dire straits. And those straits are about as dire as they could be – with disastrous quarterly results to prove it. How did this happen? Will the HTC One be enough to pull its head above water? Read on.

Today HTC announced its results for Q1 2013. They ain’t pretty. The company’s revenues are down 37 percent from the same quarter last year. Compared to Q1 of 2011, they’re down 59 percent.

But the revenue numbers don’t paint the full picture of HTC’s troubles. Profits are down year-over-year by 98 percent. Yes, you read that correctly: a 98 percent drop in profits. Ouch.

Revenues and profits are both important. But when a company's profits are worse than its revenues, it usually means that its sales aren't keeping up with its spending. In this case, though, that spending may not be a bad thing – as much of it was likely tied to creating the company's greatest hope.

The late One

The HTC One has promising ingredients ... but will it be enough to save the company?

HTC is pinning its hopes on the yet-to-be-released One flagship. In fact, that yet-to-be-released thing is a big part of the problem.

See, the One was supposed to have shipped by mid-March. That didn’t happen, as supply chain problems delayed its release to mid-April (even later in some regions). Adding insult to injury, those problems were reportedly due to suppliers no longer regarding HTC as a tier one customer. Ouch again.

Making matters even worse, the One now releases at roughly the same time as Samsung’s Galaxy S4. It’s hard to say if a month’s head start would have done much for the One’s sales. But going directly up against Samsung’s marketing machine – which HTC can’t afford to compete with – can’t possibly be a good thing for HTC.

Fall from grace

The bleeding started around the time HTC partnered with Jimmy Iovine and Dr. Dre of Beats Audio

When you look at a company like BlackBerry (formerly RIM), it’s obvious what got it into hot water. The iPhone and Android turned the smartphone market on its head, but BlackBerries remained keyboard-laden clunkers that would have been right at home in 2005.

But the reasons for HTC’s struggles aren’t quite as cut and dry. Less than two years ago, at least one research company reported that HTC had the largest smartphone share in the U.S. Now it isn't even in the conversation. That's quite the dramatic fall from grace.

There were miscues. The Beats Audio partnership was a waste of money and focus. How many people do you know who have bought a phone because it had Beats Audio? Probably not many.

The Beats distraction also came at the worst possible time: right when Samsung was stepping up to the plate with improved phones and an absurd marketing budget.

Samsung would have been a formidable foe no matter what HTC did, but duds like Beats, gimmicky 3D, and a zillion phones that looked nearly identical only made matters worse.

Is there hope?

If you’re going to stake your company on one phone, the One is a good choice. Its high-end specs, premium design, and simple branding make for a promising batch of ingredients.

Then there’s the AT&T exclusive “Facebook phone.” HTC partnered with Mark Zuckerberg and company on the HTC First, the first (get it?) device to ship with the Facebook Home launcher. It isn't a premium handset, but it could be a hot commodity for Facebook-addicted teeny-boppers across the U.S.

Is there hope for a comeback? Who knows. But you get the sense that HTC recognizes its past mistakes, and is doing everything it can to right those wrongs:

  • It sold back half of its Beats shares, and pushed its Beats marketing to the sidelines
  • No more flooding the market with slightly different EVO clones or confusing X, X+, XL, XL+ branding ... now it's just One.
  • Its lone exception to that simple focus is an exclusive partnership with the world's premiere social network.

It’s hard not to root for a company that learns from its mistakes. It's making all the smart moves to right the HTC ship.

Lovable as it may be, though, this underdog is treading water. It may take the most remarkable of launches for the One and First just to keep HTC’s head above the surface.

View gallery - 3 images