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HTC's Star Begins to Set

Taiwan-based smartphone maker HTC again posted record sales, revenue, and profits, but the company has issued a flat forecast for the near future. The average selling price (ASP) of HTC’s phones is declining and the company is setting low expectations for the final quarter of 2011. In a fast-growing market whose consumers want more smartphones, that indicates HTC isn’t keeping up with competitors.

HTC has a PDF summary of its quarterly results here, but some important bits include:

• The NT 135.8 billion ($4.53 billion) in third-quarter revenues is a 79 percent boost from the year-ago quarter because smartphone sales nearly doubled, but it’s up only 9 percent from the prior quarter.

• HTC is forecasting fourth-quarter revenues to decrease to the prior quarter’s level.

• After rising from $342 to $362 in the last quarter of 2010, the ASP of HTC handsets has fallen during each of this year’s quarters and is back down to $344. The company attributes this to local currency appreciation.

• Smartphone shipments for the final quarter of 2011 are expected to range from 12 million to 13 million units—lower than in the most recent quarter.

• HTC’s new production factory in Taoyuan should be completed in early 2012 and can ramp up to build 40 million handsets. That’s great if there’s strong demand for HTC handsets; otherwise, it’s a huge capital expenditure with a low payback.

Android Party Getting Crowded

There’s little doubt that HTC’s recent rise is due to the company having swiftly made the transition from the old Windows Mobile platform offered by Microsoft (MSFT) to  Google (GOOG) Android. The company has experienced huge jumps in sales and overall profit since making the change. HTC has also built several new Windows Phone devices but so far, Microsoft’s new mobile platform hasn’t sold well enough to have a significant impact on any handset maker.

Up to this point, HTC has been able to capitalize on Google Android’s growth by churning out a wide array of handset models for many carriers. That’s both good and bad, however. Unlike Apple with its iPhone and Samsung with the new Galaxy S II smartphone, HTC has no blockbuster hit that makes people buzz. Competitors do, and it’s paying off: Apple (AAPL) sold 4 million iPhone 4S devices during the first weekend of availability and the Galaxy S 2 is Samsung’s fastest-selling smartphone, moving 10 million units as of September.

Samsung isn’t the only Android competitor HTC faces. LG, Sony Ericsson, Motorola Mobility (MMI), ZTE, and Huawei are just a few that also use Google’s platform. The latter two in particular are swiftly increasing market share with low-cost but relatively capable smartphones. ZTE recently surpassed Apple in global handset sales. So although HTC’s early adoption of Android has paid off, particularly over the past several quarters, the game has more players now.

Nokia Pressure on HTC’s Windows Phone

On another front, HTC will surely try to protect its smartphone sales by continuing to build handsets that use Windows Phone. The company has already announced the Titan and Radar, both of which use the latest version of Microsoft’s mobile platform. Here, too, competition is building, with Microsoft’s newest partner, Nokia (NOK), launching a pair of handsets last week. These appear to have a higher build quality than HTC’s usual handsets and include some Nokia software exclusives.

HTC continues to build excellent handsets. Back in June, I suggested that the HTC Sensation was the best available for T-Mobile customers, for example. And the company continues to innovate and add value by maturing its HTC Sense software interface that helps make Android smartphones easier to use.

Still, HTC is essentially an Android phonemaker in a growing sea of Android phonemakers. Buying lifestyle brands such as Dr. Dre’s Beats won’t solve the problem, as Om wrote when HTC spent $300 million on that purchase. I could be wrong, but all signs point to HTC’s shift from rising star to plunging meteor as it struggles to determine where the next batch of growth might come from.

Also from GigaOM:

A Global Mobile Handset Platforms Forecast, 2011–2015 (subscription required)

Solar Incentives to Fall Amid Uncertain Global Economy

Boxee Gets More Porn With FyreTV App

Gates Understands Why Jobs Said Mean Things About Him

Mobile and the Rise of the Smart Buyer

Tofel is a writer for the GigaOm Network.

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