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HTC Prepares To Unveil First Smartwatch Design

Taiwan-based HTC currently only sells smartphones. The company has had a rough go of it lately – but perhaps a new product category, like smartwatches, is a logical next step?

That may not reflect the company’s rationale precisely, but HTC nevertheless has arrived at the same result. Bloomberg this week reported the company will give wireless carriers a peek at the first of a trio of new smartwatch designs at next week’s Mobile World Congress – at which we also expect to see a slew of watches, fitness trackers and similar wearable tech on display.

HTC’s inaugural wearables are expected to be available for purchase by Christmas. The company’s first smartwatch, a source told Bloomberg, will include features like Bluetooth connectivity and a music player, with a second watch incorporating Google’s predictive digital assistant Google Now. Also on the way from HTC is a “smart bracelet” with a touchscreen display that “has a music player and activity-tracking features.”

The smartwatch news from HTC doesn’t come as a surprise. The company said at an analyst and investor meeting earlier this month it expects to see its gross profit margins rise this year as a result of better product selection, which will include a new version of its flagship phone, as well as an entry into the wearable market.

What also hasn’t escaped anyone’s notice is HTC jumping into an already crowded field – and, for that matter, doing so from a position of weakness.

Two or three years ago, for example, HTC was responsible for one of every 10 smartphones sold around the world. Now, its global market share is a mere 2 percent.

While HTC makes well-reviewed smartphones, this wasn’t enough to stop things like falling sales and executive departures last year, and on Feb. 10, the company forecast a third straight quarterly operating loss. And a move into smartwatches? Well, the general public isn’t exactly lining up in droves to snatch them up from anyone.

A report from Jupiter Research in December noted that wearables, for the moment, represent “nice to have” as opposed to “must have” products for consumers, and that it’s “clear that the market – for example, the smartwatch market in particular, will be – as per smartphones – a somewhat crowded affair.”

A competitor like Samsung probably won’t bat an eye at this HTC smartwatch news. According to Strategy Analytics, a little less than 2 million smartwatches shipped worldwide last year, with 61 percent running Android. Of that 61 percent, the most popular Android watch was the Samsung Galaxy Gear. And while Samsung is already far ahead, Apple is reportedly preparing for an imminent launch of its own smartwatch.

Illustrating the challenge of entering the field, a Barclays analyst interviewed on CNBC Thursday morning said he thought Apple would only see a $3 or $4 incremental earnings per share growth as a result of releasing a smartwatch – that, in fact, a smartwatch would, for Apple, be more of a support for the iPhone than anything else.

Meanwhile, for HTC – as with anyone, really – the first step toward solving a problem is realizing you have one.

“We took our eyes somewhat off the ball” when it comes to product lineup, HTC CFO Chang Chialin told Bloomberg this month, suggesting the company knows it has a problem – and is preparing to make moves to get itself back into the ballgame.

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