Microsoft, HTC draw closer to create smartphone rally

Microsoft Corp. Chief Executive Officer Steve Ballmer, on a swing through Taiwan this month, made time to meet with Peter Chou, his counterpart at HTC Corp.

On Chou’s agenda: the low screen resolution that prompted HTC to scrap plans for a bigger smartphone using Microsoft’s mobile software, a person familiar with the matter said this week.

Ballmer needs to stay on Chou’s good side. HTC could help his company vie with Apple Inc. and Google Inc. in the 718- million-unit smartphone market, where, according to researcher IDC, Microsoft has only a 2.6 percent share. After trying to gain ground for a decade without success, Microsoft needs HTC ― which has drawn praise for its current Windows devices ― to help it win over consumers with a hit product.

“HTC is important to Microsoft because they put together one beautiful smartphone and when you have that kind of DNA, you have a company that can boost general acceptance and market share,” said Ramon Llamas, an analyst at IDC. “If you want bigger market share, getting multiple vendors is the name of the game.”

Microsoft is also relying on Nokia, became the lead Windows partner last year through a multibillion-dollar marketing agreement, to boost its presence in the smartphone market.

To strengthen ties to HTC, Ballmer and Chou meet in person a few times a year and exchange phone calls and e-mails frequently, according to a person with knowledge of the matter. It helps that Taoyuan City, Taiwan-based HTC runs its U.S. operations out of Bellevue, Washington, a Seattle suburb next door to Redmond, where Microsoft is based.

In other evidence of the closer cooperation between HTC and Microsoft, the HTC 8X is shown in about 70 percent of Microsoft’s advertising highlighting a specific phone, said Jason Mackenzie, HTC’s president for global sales.

Both companies need a hit. Microsoft, two years after completely overhauling its mobile software, risks being shut out of the growing market by smartphones based on Google’s Android software and Apple’s iPhones.

HTC, which also makes Android phones, in October forecast its lowest sales in 11 quarters as it loses Android customers to Samsung Electronics Co. HTC had a 4.7 percent share of the global smartphone market in the third quarter, IDC said, down from a peak of 10.7 percent in the second quarter of 2011.

Samsung dominated the Android market with 41 percent share of those phones in the third quarter, IDC’s Llamas said. HTC, with 5.5 percent, is in a battle for the No. 2 spot with seven other vendors, he said.

HTC can’t afford to lose further ground. Chou decided to scrap plans for a large-screen Windows smartphone because a low- resolution version wouldn’t have been competitive, a person familiar with the project said this week. That left HTC with only Android for phones measuring larger than 5 inches diagonally, and fewer products to claw back share from Samsung, which offers Galaxy Note devices with bigger screens. 

(Bloomberg)