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HTC's First Products for Under Armour Highlight a Risky Path Forward

The products themselves are nice enough, but are they the right path for HTC?

Under Armour

Struggling phone maker HTC and activewear manufacturer Under Armour are finally ready to show the results of their partnership, announced a year ago. Here’s what they came up with: A $400 box of gadgets called HealthBox that includes a fitness band, a connected scale and a chest-mounted strap for monitoring the heart during workouts.

The products themselves are nice enough, but they may be too little, too late for HTC, whose core phone business is in a rapid state of decline.

A lot of companies are looking to add tech to their various products, including “clothing, jewelry, fitness, health and even insurance brands,” said Kantar Worldpanel analyst Carolina Milanesi. And the competition for those products — and among the companies looking to be their tech partners — will be fierce.

“That said, HTC is between a rock and a hard place, and with smartphone sales struggling, they need to try new markets,” Milanesi said.

Going down the wearable and consumer electronics path is not necessarily easier. Not only is it a market that Apple and others are struggling to crack, but the entire Chinese city of Shenzhen is packed with contract manufacturers eager to help non-tech companies like Under Armour get in the game. Tech companies including Intel and Qualcomm are also keen to tie up with consumer brands, and have near-ready reference designs for a broad range of products at the disposal of such companies.

For HTC, the move to work with others is something of a return to the company’s roots. It got its start as the unseen contract manufacturer behind the Compaq iPaq and some of the earliest Windows, Palm OS and Android smartphones.

“Working as the behind-the-scenes designer and manufacturer of the most popular mobile devices on the market — Palm, Compaq, Dell, Sony — demonstrates our ability to collaborate with other big companies to bring new innovation to market,” HTC executive director Wolfgang Muller told Re/code. He stressed that by combining strengths, HTC and Under Armour were able to do more than either company could have done solo. “This provides a speed to market and experience that can’t be replicated by any one company.”

There is the question of just how lucrative these kinds of deals are for the tech company involved, something neither HTC nor Under Armour is talking about. What is clear is that HTC is playing a distinctly supporting role in the branding of the Under Armour products, with its logo occupying a rather small space on both the products and the packaging.

But something needs to change at the once high-flying Taiwanese company. HTC’s phone market share is in free fall, and the company has posted steep losses in the last two quarters, while revenue has continued to plummet. In its most recent quarterly earnings report, the company reported an operating loss of roughly $140 million, on revenue of around $640 million. In the same quarter a year ago, revenue was nearly twice that much. Four years ago, its quarterly revenue was six times higher.

HTC’s efforts to become a software player failed to gain traction, while HTC’s quirky action camera, called Re, also fell flat.

The company replaced longtime CEO Peter Chou with chairwoman Cher Wang, and has also slashed its workforce.

HTC’s other big bet — the Vive virtual-reality headset — continues to make the rounds at trade shows, while shipments to consumers have been delayed until at least April. Vive will be duking it out with well-financed rivals Facebook and Sony.

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