HTC Corp. is being shut out of the introduction of Microsoft Corp.’s next Windows software, people with knowledge of the matter said, cutting off another source of revenue after HTC reduced its second-quarter sales forecast by 13 percent.
Microsoft locked out HTC from the development of products using the newest version of its operating system on concern that HTC doesn’t sell enough devices or have ample experience making tablets, said the people, who asked not to be named because negotiations between HTC and other companies are private.
Microsoft’s decision will keep HTC from participating in the electronics industry’s latest attempt to erode Apple Inc.’s lead in tablets. The Taiwanese company is also facing shortages from chipmaker Qualcomm Inc., highlighting the challenge of competing with Apple and Samsung Electronics Co. -- two companies whose lead in manufacturing and software are increasingly marginalizing smaller rivals like HTC.
“Every consumer knows about Samsung’s Galaxy platform and the iPhone, and you are starting to see consumers coalesce around them,” said Matthew Thornton, an analyst at Avian Securities LLC, who yesterday cut his rating on HTC to “negative.” “Things just get worse from here. It’s a very bleak outlook.”
Microsoft plans to release its next Windows operating system, the first to run on chips with technology from ARM Holdings Plc, in time for the holiday shopping season. The new version of the software, designed to run tablets that compete with the iPad, is called Windows RT. Other tablets and computers will be made using chips based on Intel Corp.’s technology. The software, also called Windows 8, will appear in devices from companies like Toshiba Corp. and Asustek Computer Inc. later this year.
Catherine Brooker, a spokeswoman for Microsoft, declined to comment. Sally Julien, a U.S.-based spokeswoman at HTC, didn’t immediately have a comment.
HTC, maker of the first Google Inc.-branded smartphone and Microsoft’s first Windows-based handset, has been unable to either develop its own software or hardware or sell enough devices to make it the first in line for its suppliers, said Ramon Llamas, an analyst at IDC.
“Controlling the supply chain or influencing the supply chain is one of the things that takes you to success,” said Llamas. “It can very quickly turn on you if you’re not controlling everything in house.”
HTC said yesterday that second-quarter sales would be NT$91 billion ($3.05 billion), below a previous forecast of NT$105 billion because of product delays in the U.S. and lower-than- anticipated sales in Europe. Besides smartphones, HTC also makes tablets with Google’s Android operating system.
Microsoft, which has tightly controlled the number of ARM- based devices it is supporting at first to ensure quality, opted not to work with HTC after initial discussions with the company, said two people familiar with the matter. The world’s largest software maker decided HTC didn’t have the sales volume needed and had less tablet experience than some of the other vendors it could choose to work with for the first round of devices, the people said.
HTC engineers wanted to build a Windows device with a customized home screen that would be distinctive to its devices, as manufacturers are allowed to do with Android. Redmond, Washington-based Microsoft refused, said the people, and HTC was left off the list of companies the software maker provided with early versions of the software.
HTC may release a Windows device later, in a second round of products to come next year, one of the people said.
© Copyright 2021 Bloomberg News. All rights reserved.