HTC Operations Chief Steps Down Amid Smartphone Delays

HTC Corp. (2498) Chief Operating Officer Matthew Costello stepped down after less than three years at Taiwan’s biggest smartphone maker amid slumping sales that have pushed down its shares about 76 percent in the past two years.

Fred Liu, who is president of engineering and operations, took on Costello’s responsibilities in an expanded role covering operations, quality, sales operations and services, Liu said in an e-mail to employees obtained by Bloomberg News. Costello will stay on as an executive adviser after moving to Europe, according to the e-mail. Taoyuan, Taiwan-based HTC confirmed both moves in an e-mailed response to Bloomberg.

HTC, which posted a 98 percent drop in net income last quarter, has had at least four senior executives depart in the past two years, including its finance, design and marketing chiefs. Its flagship HTC One handset, released in the U.S. in April, is key to the company’s attempt to build a global brand and revive growth, President Peter Chou said last month.

“HTC’s COO stepping down is a positive move as there were too many executives,” said Bamboo Lin, an analyst at SinoPac Securities Co. in Taipei. “‘A moderate streamlining is good for the company.’’

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A man uses a mobile phone as he stands in front of an advertisement for HTC Corp.'s J smartphone in Taipei.

Taiwan’s largest smartphone maker will also form a new quality assurance division, headed by Georges Boulloy, which will look after product reliability, according to the e-mail. A new team will handle product life-cycle matters, it said.

HTC declined to comment on the other appointments in its response.

Marketing Campaigns

The stock fell 0.9 percent to NT$285 in Taipei trading today, extending its decline this year to 5.2 percent, compared with a 6.3 percent gain for the Taiex Index.

The smartphone maker will use the early success of its One model to boost marketing campaigns, Chief Marketing Officer Ben Ho said.

‘‘We’re going to be bolder with marketing in the second half,” Ho said in an interview in Taipei today, declining to comment on the budget for the campaigns. “We’re not going to hide our brand anymore.”

Delays in new handsets, marketing failures and management turnover pushed HTC’s net income to the lowest on record last quarter. Once the top-selling smartphone vendor in the U.S., HTC now lags behind Samsung Electronics Co. (005930) and Apple (AAPL) Inc., which ship 22 times as many handsets globally combined.

Design Weaknesses

HTC, the first maker of phones using software from Microsoft Corp. and Google Inc., has seen its share of the global smartphone market share fall to less than 4.2 percent from 10.3 percent in the third quarter of 2011, according to market researcher IDC. During that period, Samsung and Apple shipments more than doubled, helping trigger a 40 percent drop in HTC’s stock last year after a 42 percent decline in 2011, according to data compiled by Bloomberg.

Photographer: Haruyoshi Yamaguchi/Bloomberg

Fred Liu, president of engineering and operations of HTC corp., hold up htc EVO WiMAX smartphones manufactured by HTC corp., during an unveiling in Tokyo. Close

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Fred Liu, president of engineering and operations of HTC corp., hold up htc EVO WiMAX smartphones manufactured by HTC corp., during an unveiling in Tokyo.

HTC last year said it “dropped the ball” on products, pointing to weaknesses in design and engineering. The unveiling of models One X, S and V in February 2012 was supposed to herald a reversal of fortune, yet a lag of as many as six months before shipment, and complaints about connection problems and overheating, saw sales miss analyst estimates.

Made with a thin aluminum case, HTC One includes an UltraPixel camera, full high-definition screen and front-facing speakers. New York Times reviewer David Pogue said it was “gorgeous” and Bloomberg’s Rich Jaroslovsky described the phone as “state of the art.”

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Cindy Wang in Taipei at hwang61@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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