Apple 2.0

Covering the business that Steve Jobs built

Android's original standard bearer -- HTC -- falls from grace

February 6, 2012: 6:42 AM ET

Squeezed by Apple and Samsung, it had a bad quarter and expects the next to be worse

There was a time when HTC and Android were practically synonymous.

The Taiwanese manufacturer built the first commercially available Android phone -- the HTC Dream -- in 2008, and two years later collaborated with Google (GOOG) to build the Nexus One, the flagship of the Android line. Last November, it edged past Samsung, Apple (AAPL) and Research in Motion (RIMM) to take the lead in the U.S. market for smartphones.

How the mighty have fallen.

On Monday, HTC reported a 26% drop in fourth quarter profits and warned that revenues could drop 36% this quarter. Despite promises that the company would bounce back on the strength of four new models to be introduced at the Barcelona Mobile World Congress, the stock closed 5% lower in Asian trading.

"Our weakness in first-quarter guidance ... comes from facing competition in the U.S. from iPhone and Samsung," CFO Winston Yung told analysts in a conference call. He declined to provide unit sales numbers.

According to IDC, Samsung is now the No. 1 maker of smartphones in terms of shipments, both in the U.S. and worldwide (see here). But Apple is taking an ever larger share of the profits. In the December quarter, according to Asymco's Horace Dediu, Apple's iPhone captured 75% of worldwide profits in mobile phones -- smart or dumb -- with only an 8.7% market share, leaving precious little on the table for companies like HTC.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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