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Andrew Hoyle/CNET
Smartphone maker HTC has announced sweeping layoffs as co-founder and CEO Cher Wang works to rebuild the ailing company.
HTC will cut 15 percent of its workforce as part of a broader push to refocus on “premium smartphones, virtual reality, and connected lifestyle products,” the company announced on Thursday. At the end of HTC’s last fiscal year ended March 31, the company employed 15,685 people. Once the layoffs are complete, over 2,300 people will have lost their jobs.
The layoffs were tipped off on August 6 when HTC announced its earnings for the second quarter of 2015. The company, which generated revenue of NT$33 billion ($1.04 billion) worldwide (PDF) during the second quarter, or just half of its NT$65.1 billion revenue during the same period last year, said that it was examining ways to “implement company-wide efficiency measures to reduce operating costs across the organizations.” In corporate speak, that often means layoffs.
The layoffs reflect the troubled spot HTC finds itself in. The company, which was once a prominent smartphone maker, has failed to compete against flagship handsets, like Apple’s iPhone and Samsung’s Galaxy line. The Taiwan-based HTC has also found it difficult to attract consumers in China — widely viewed as one of the most critical markets in the world — as companies like China-based Huawei and Xiaomi continue to gain market share.
Meanwhile, HTC has shaken up its leadership to try to turn things around. In March, the company’s long-time CEO Peter Chou was replaced by co-founder and chairwoman Cher Wang. Chou, who is still at HTC, is now focused on developing new products. The company has also been unsettled in a critical role, the position of design chief, with the departure in April 2014 of Scott Croyle and this past March of his replacement, Jonah Becker.
As its smartphone stature has ebbed, HTC has started to branch out with a wider range of gadgets, including the Re camera , the Grip fitness band and the Vive virtual-reality headset. Looking ahead, HTC says that it will continue to invest in diversified areas. HTC will also not rely so heavily on smartphones, though it plans to continue offering high-end handsets.
HTC’s layoffs could ultimately help the company rebuild its financials. HTC reported on Thursday that the layoffs and a broader “business realignment” strategy will help it reduce its operating expenses by 35 percent. That could be good news for investors who bristled at the company’s operating profit — a measure of the difference between revenue and expenses before taxes, interest, and other items are factored in — tumbling from a gain of NT$2.4 billion a year ago to a loss of NT$5.1 billion in the second quarter.
The drive to cut expenses is shared by China-based PC and handset maker Lenovo. That company announced on Wednesday that it will slash 3,200 jobs, or about 5 percent of its 60,000-employee workforce. Like HTC, Lenovo, which has struggled to gain traction in the smartphone market even after its Motorola acquisition, is hoping the cuts will reduce expenses. The layoffs followed Lenovo’s announcement that its profit was down 51 percent year-over-year in the second quarter to $105 million.
HTC did not immediately respond to a request for comment.
