The alarming behavior of HTC’s management

HTC Management Team Criticism

The latest quarterly report horror from HTC had a psychologically fascinating element. The third-quarter loss of $100 million was nearly twice as big as the analyst consensus expected and HTC managed to miss the revenue guidance it had issued a few months earlier. Why is this fascinating? Precisely because we have seen this same pattern repeat itself for so many times, yet it still persists.

HTC’s high-end strategy started falling apart during around Christmas 2011. The company has wrestled with sales and earnings by missing expectations for nearly two years now, but it is still unable to guide investors appropriately for the following quarter. HTC’s executive team consists of people who have been messing up forecasting since Flo Rida was relevant yet the company still continues issuing overtly optimistic guidance numbers.

This kind of absolute denial is actually extremely rare. Other basket cases like BlackBerry and Nokia have had a very rough two years as well. But over that period, they have had stretches of realistic guidance policy. Both BlackBerry and Nokia had share price rallies in late 2012, driven by the way the companies brought their sales projections down aggressively and then managed to beat lowered expectations. This betrayed at least brief glimmers of competence from the management teams.

But not HTC. Taiwan’s little engine that couldn’t has been gloriously, majestically out to lunch for two years. Wrapped in absolute obliviousness and an impregnable siege mentality, HTC has kept guiding revenue and earnings estimates too high with a nearly psychotic conviction. Another important insight into HTC’s corporate mindset was the $1 billion ad campaign that the company chose to launch with a wildly extravagant compensation package for Robert Downey Jr.

The combination of the inability to get a grip of its own sales trends and the megalomaniacal marketing blitz for a dying product line is mesmerizing. We are witnessing a major technology company spin out of control in a way that even BlackBerry cannot match. After all, the Canucks were dealt a very tricky hand with a creaky old operating system and lack of true hardware expertise. But HTC has been riding a winning mobile operating system and it possesses dazzling engineering, component sourcing and production management skills.

Yet even with these formidable advantages, HTC has been able to not only to start bleeding $100 million per quarter, but demolish the credibility and reputation of its executives comprehensively.

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