People of a certain age will remember the Cola Wars and the blind taste tests of the late 1970s and '80s. The “Pepsi Challenge” was a cultural phenomenon that has endured as a enduring marketing slogan for almost 40 years. 

In 2013, the Cola Wars are passé. Now, we have smartphones. 

Last week I decided to perform my own Smartphone Challenge. I walked around with two smartphones, the HTC One and a Samsung Galaxy and handed them to random people. “First impression, which phone would you want more?” I asked. Of 25 people I asked, 18 of them preferred the HTC One. 

The test was not scientific and user interaction was not substantial. It was more of a first-impression type of thing. Now, this is not a marketing pitch for HTC. It is merely an observation that goes to support a point: HTC makes very nice smartphones and it would be a shame if this manufacturer died - which could happen. 

HTC has posted six straight quarters of declining revenue. Its most recent quarter, it barely eked out an operating profit and the company’s leaders expect the next quarter to be worse. Unlike mid-level rivals BlackBerry and Nokia (whose fall from grace mirrors that of HTC), the Taiwanese manufacturer is not sitting on a large cash hoard.

HTC’s two most recent phone launches, the One and the First (the “Facebook Phone”) show that it has the chops to rebuild its brand and market share. 

What Makes The HTC One Best Of Brand

Aesthetics: First, let’s move past the fact that the HTC One does not have a removable back or expandable memory slot. The One is built with a full metal body, 4.7-inch display with one of the best screens that has come out on a smartphone at 468 pixels-per-inch. At 143 grams (5.04 ounces) it is not the lightest smartphone on the market, but it is definitely sturdy. The weight, size and build were the reasons most-cited in the first-impression test when people held the One.

Apple, Samsung and Nokia all make beautiful phones as well. HTC can definitely put the One up against any of its competitors ounce for ounce, inch for inch and say that it has one of the best looking phones on the market.

Hardware: HTC has not always been a hardware leader. That title goes to Samsung and the specs from the forthcoming Galaxy S4 prove that yet again. But, HTC is no slouch. The battery is 2300 mAh, considerably bigger than the 1800 mAh the One X shipped with at this time last year. It still falls behind the impressive 2600 mAh of the S4 but the battery life of the One is good enough to last a full day of moderate to heavy use when Wi-Fi, GPS and LTE are all being employed by the user. 

The quad-core Qualcomm Snapdragon 600 keeps things moving along well on the One. The Snapdragon 600 is the same chip that the Galaxy S4 and LG Optimus G Pro will employ in the United States.

The One has two front-facing speakers employing what it calls “BoomSound.” Boom indeed. The sound on the One reminds me of the portable stereo I used to have in the early 90s, but better. I do not recall ever having to turn down the volume on a smartphone when playing music through its speakers, but I had to with the One. Quality was not sacrificed either, as every note came through clearly. Now, while the sound is impressive, not many consumers tend to play music through their smartphone speakers, eschewing it for the comfort and privacy of ear buds.

Sense Features: HTC has a new skin with the One – Sense 5.0. It has been difficult to quantify Sense among users over the years. Some love it, some hate it. If anything can be said about Sense 5.0 is that it generally stays out of the way of the user experience, with a couple notable exceptions. The first is “BlinkFeed” the built-in content feed that doubles as the home screen when you turn on the device. BlinkFeed aggregates from your Facebook newsfeed along with highlights from various publications of interest. It is kind of like having the Pulse News reading app as a home screen that updates itself. In and of itself, that is not a bad thing if you are a news junkie. Yet, BlinkFeed does not allow you to bring in customized feeds for publications not already in its network. For instance, if I want technology news, I can use the “tech highlights” setting or get feeds straight from The Verge or CNET. While quality publications, I prefer a more egalitarian set of choices for my news that I can control. 

You cannot remove BlinkFeed as one of the panels on your device. If you want to marginalize it, you can set a different panel as your home screen. Sense 5.0 only allows five panels, reducing real estate to pin apps and widgets to your device.

Camera: When HTC announced that the One would have “ultrapixels” we basically scratched our heads and said, “ummm, what?” Ultrapixels is a marketing term and not a very good one at that. But how does the actual camera perform? Very well.

Ultrapixels are supposed to allow more light into the aperture of the camera, creating clearer pictures, especially in low-light settings. We have found this to be true, as seen in the  examples below.

Low light conditions at a concert (Ben Mirin of VentureFizz beat boxing at a charity event)

The popular thing to do among smartphone makers these days is to pack as many features into their cameras as possible. The Samsung Galaxy S4 is particularly egregious at this, but Nokia and Apple are both guilty as well. HTC is no different. It has a variety of settings for sharing (under the HTC Zoe feature), the ability to take “sound photos,” panorama shots, various filters, shoot and edit videos (at 1080p) and more. Frankly, most people are going to just open the camera app and snap a photo but HTC provides a variety of advanced features as well. The smartphone camera wars are alive and well and the advanced capabilities brought forth by various manufacturers are a good thing for consumers, developers, hobbyists and enthusiasts. 

HTC First: A Decent Option For The Mid-Level

The Facebook Phone (the HTC First) is remarkable for really one reason: Facebook. Otherwise, this device is so non-descript that it is almost painful. David Pogue of The New York Times probably said it best when he described the First: “What’s the deal with this phone? It’s plastic, dull, uninteresting. It’s so generic, it should come in a plain white box that says PHONE on it.”

Harsh, but true. The first impression of the First when taken out of the box might be, “wow, this looks like an iPhone.” That is where the comparisons to Apple’s flagship stop. The phone runs Facebook Home as a launcher, which is fine if you like Facebook and want it centralized as the skin for your phone. Otherwise, the First runs stock Android Jelly Bean. You can use the phone without Home, which essentially turns it into a mid-level smartphone not unlike a Google Nexus device except without the official Google support that the company gives its flagship Android devices. 

Really, that is not entirely a bad thing. The First comes at a reasonable price ($99 on contract through AT&T or $449.99 off contract) and can be attuned to a full Android experience or an Android experience colored by Facebook. The market for that type of device could be parents looking to get their teenagers their first smartphones or developers looking for a relatively cheap Android device to test apps on. The First may not be anything special, but if you are looking in the middle market for smartphones, you could definitely do worse. 

With the One and the First, HTC could gain momentum to overtake several of its rivals, which are numerous. Right now, HTC’s biggest rival is probably Nokia, which has filed an injunction against the One for use of microphone technology in the device. But HTC also has to battle for position with the leaders of the pack in Apple and Samsung as well as the Android Army of ZTE, Huawei, LG and others. If it can avoid the pitfalls that doomed it the last two years (legal issues, distribution and marketing), HTC has the tools to come out ahead. 

Here's one for you: how is it that some of the smartest, richest, market-savviest companies on the planet - allegedly - can't seem to figure out how to name their products in a way that isn't strikingly confusing?

The "new iPad" is not to be confused with the iPad 2. The new iPad is in fact, iPad 3. Only, Apple doesn't call it that - nor do they market it as "new iPad" anymore, either. Rather, it is now branded as "iPad with Retina display" - with the "R" capitalized, though not the "d."

Don't ask me why.

While the iPad with Retina display is newer than iPad 2 it does not come with a model number. Nor does the iPad Mini. At least, not yet. I assume that Apple will still sell "iPad Mini" - likely at a lower price - when the newest "Mini" model is released. Which I'm also guessing will be called "iPad Mini with Retina display." Or maybe iPad Mini 2. 

After that, all bets are off.

Which brings up the question: how is it that some of the smartest, richest, market-savviest companies on the planet - allegedly - can't seem to figure out how to name their products in a way that isn't strikingly confusing?

Welcome To Branding Hell

What comes after iPhone 5? iPhone 5S, perhaps? Or iPhone 6? Is there any real difference? 

And will it come pre-loaded with iOS 7?

Yet despite the inexplicable naming conventions that Apple uses for its products, it's not the worst perpetrator - not even close. 

Which is better? The HTC One or the HTC First? How is it possible that HTC offers multiple "Ones" at the same time? Which "one" do you want?

• HTC One
• HTC One S
• HTC One SV
• HTC One V
• HTC One X
• HTC One X+ (no, I did not make that up)

I'm not even going to attempt to wade through the angrily confusing versions and price points of software products, such as Microsoft Office. There's "Premium," "365," "Enterprise," Mid-Sized Business" - to name only a few!  

Technology is here to help us. Otherwise, it does not belong. Technology with a confusing name is, therefore, suspect. If you can't even get the name right, what else might be wrong with it?

A Galaxy Far, Far Away

Consider Samsung. Go into an AT&T store, for example, and there you find at least six different "Samsung Galaxy" devices. These are not to be confused, however, with the various "Galaxy Nexus" devices. In other words, the Galaxy brand name now means essentially nothing.

If you don't believe me, just answer this question: which Galaxy is right for you? A Samsung Galaxy S III or a Samsung Galaxy Note II? Will you even bother to find out? Should you have to try?

What? There's a line of various Galaxy "Tabs"? 

Does Samsung not want my business?

And is the Galaxy Note 8.0 four times better than the Galaxy Note II? (Or do Roman numerals count for more?) Wait. Will the next version of the Galaxy Note 10.1 be a 10.2? 

Nor is it possible to divine the brand meaning - and thus the brand value - of the Motorola Droid line versus Android versus Nexus - all of which is owned by Google. Which I've heard is now overseen by the Google Chrome team.

Do companies just pick names out of a hat?

If not, then how much money did Nokia pay its marketing staff to promote the Lumia 820 as "our most versatile phone?" Was it more or less than they paid the team that branded the Lumia 920 as "our most amazing phone?" 

In just the U.S., there is a Lumia 710, 800 810, 820, 822, 900 and 920. I dare you to uncover the meaning, intent, price, value, speed and/or ability of any of those based on their actual name. According to Nokia's own site, the Lumia 900 is available "from $0.01" whereas the Lumia 800 is "from 526.72." 

Why? It seems backwards.

And, no, I am even going to try and select which of these fourteen different Blackberry smartphones is right for me.

Are these companies even paying attention? Maybe it's time for some brand simplification to put some sense in the market place.

Image courtesy of Shutterstock.

Once-vaunted smartphone maker HTC is scraping the bottom of the barrel. On Monday it posted its sixth straight quarter of declining revenues and barely made an operating profit in the first quarter of 2013. While it may be time to officially place HTC on the ReadWrite Deathwatch list, the biggest impact of HTC’s declining financial position could be trouble for two of its most important partners, Microsoft and Facebook.

Facebook Home Microsoft Could Be Left On The Sidelines

Next to Samsung and Nokia, HTC is one of the few major smartphone manufacturers that builds Windows Phones. For those that pay attention to these kinds of things, the HTC 8X is perhaps the most sleek, beautiful and powerful Windows Phone around, including Nokia’s flagship Lumia devices. 

Despite their beauty, though, HTC’s entries into the Windows Phone market have not created a lick of excitement. For HTC or for Windows Phone. Despite recent gains, Windows Phone remains a bit player in the Smartphone Wars next to iOS and Android. It's stuck in a fight with resurgent BlackBerry for the scraps from Apple and Google’s table. On the flip side, Windows Phone has not been a boon for HTC. If it was, we would not be discussing the mess that is the Taiwanese manufacturer’s situation right now.

With the declining profit, HTC only has so much bandwidth to tackle the various issues on its plate. And there are a lot of issues. It is rolling out a huge marketing campaign for its flagship HTC One Android device. It plans on entering the low-end smartphone market to take advantage of high growth regions like China and India. It has to address the components shortage that has led to the month-long delay of the launch of the HTC One. 

The One has to be HTC’s priority. The flagship phone is an all-in bet for the company and it needs to channel its resources to get consumers to buy it. The biggest factors for adoption will be how well HTC can distribute the smartphone to carriers across the globe and then effectively market it to high-end consumers. 

Where does that leave Windows Phone and Microsoft? Likely on the sidelines. HTC has to have learned the lesson that producing even really good Windows Phones will not give it an appreciable bump in revenue. And the manufacturer has only so many bullets it can shoot at once.

The Facebook Effect

Facebook is in a different spot than Microsoft in its partnership with HTC. The HTC First will be an Android phone launching with the Facebook “Home” skin/launcher later this week. Initial impressions are mixed. On one hand, Facebook created an interesting skin to lay on top of the Android operating system. It looks good, has some intriguing features and should foster Facebook app development for the Android environment. On the other hand, if you do not really care for Facebook, Home is not going to be worth the trouble. Hence, neither will the HTC First. 

The First is also working with last year’s hardware specs. Really, there is little special about the phone itself other than the application layer that Facebook is adding. The First is naturally limited by design from both the hardware and software angles.

Yet there is something to be said for Facebook Home launching on the HTC First. Like Opening Day in baseball, expectations are still fresh and hope is still alive - even for franchises extremely unlikely to end the season on top.

Facebook is doing all the heavy lifting when it comes to the software of the HTC First. And since HTC is not pushing the bounds on new components, it theoretically should cost the company very little to develop and produce the "Facebook Phone." If we  assume that Facebook will also handle the marketing of the device and HTC’s partnership with Facebook becomes a no-lose, possibly big win proposition. If HTC can take what is essentially a proof-of-concept smartphone and make any real revenue from it, everybody wins. 

Time and again, Mark Zuckerberg has made it perfectly clear: "We're not going to build a phone." Zuck's most recent pronouncement came at Facebook's 2012 fourth-quarter earnings call.

(See also Facebook's Zuckerberg: We're Not Going To Build A Phone.) 

On Thursday, just two months later, Facebook is widely expected to announce an Android device in partnership with HTC at an event at its Menlo Park headquarters. The phone - yes, the Facebook phone - is expected to run a modified but not fully skinned version of Android, retooled to revolve around the little blue "f" that has come so far. At least that what the leaks seem to reveal.  If we're getting into semantics, you could say Facebook isn't building the Facebook phone - HTC is. 

So, How Did We Get Here?

Want to review the many times Zuck has denied rumors of an official Facebook phone? Here's a refresher:

November 3, 2010:

• "First of all, we're not a hardware company. Second of all, our goal is not to sell anything physical; our goal is to make it so that everything can be social."
• "It would be pretty silly for us to go after a strategy that focused on selling a small number of phones. We don't sell hardware. That's just not what we do." 

September 11th, 2012:

• “That’s always been the wrong strategy for us,” he explained. “It’s a juicy thing to say we’re building a phone, which is why people want to write about it. But it’s so clearly the wrong strategy for us.”

January 30, 2013:

• "People keep on asking if we're going to build a phone," said Zuckerberg. "We're not going to build a phone."

In retrospect, it seems the denials around "building" a phone seems to have left the door open for hardware partners. It's not like we thought Hacker Way was going to turn into Foxconn or anything, but assuming Thursday's event turns out as expected, that Zuck sure is one literal fellow.

But What About The Other Four Facebook Phones?

The real funny thing? If Facebook launches a phone, it won't be the first Facebook phone at all - it'll be the fifth. 

Facebook Phones 1 and 2: Back in Februrary 2011 at Mobile World Congress, HTC unveiled a pair of phones with a curious twist: a physical button dedicated to launching the Android Facebook app. The HTC Status (a.k.a. the ChaCha) and the HTC Salsa were mid-range devices with largely unimpressive specs.

Facebook Phones 3 and 4: That April, a company called INQ announced the INQ Cloud Touch and the INQ Cloud Q - two semi-smartphones that would run a version of Android 2.2 interwoven with Facebook's Social Graph API. The Cloud Touch made it to shelves in the UK; INQ abandoned plans to manufacture the Cloud Q early in 2012.

Of all of the "Facebook phones" to date, the HTC Status enjoyed the most success, but that's not saying much. I reviewed it at the time - It was well built, with a funny little curve to the casing, social widgets everywhere and a tiny blue Facebook button on the bottom right. There was something likable about the Status - it was a playful little device, thoughtfully designed - but who was it for?

The Status went on sale - and then went on sale again - and ultimately just sort of faded away. Now you can get one for a penny on Amazon.

A New Mobile Era For Facebook?

But times have changed and the stakes have gotten a lot higher. After some major mobile fumbles (its slowness to the iPad, building in HTML5, etc.), Facebook now calls itself a mobile company, and really wants to mean it. 

In September of 2011, Facebook's Android app had 66 million monthly active users. By November 2012, that number had tripled. Facebook consumers one quarter of the total time people spend on mobile apps. In the fourth quarter of 2012, 23% of Facebook's total ad revenue was pumped into its coffers via mobile - up from 0%.

Facebook obviously gets the importance of mobile now. But it's still not clear why a new Facebook phone is a good idea. The company is as cozy as can be on Android and iOS already, and Facebook would be lucky to sell even "a small number" of these new phones, just as Zuck warned back in 2010. Even if the new Facebook software presented unique monetization opportunities, the revenue would barely be a drop in Facebook's ever-growing bucket.

So why bother? I guess we'll find out on Thursday. 

All photos by Taylor Hatmaker.

Smartphone manufacturer HTC is no longer “quietly brilliant.” HTC now wants to be as in your face as possible to attract consumers from the likes of Apple and Samsung. What better way for HTC to make a major splash than by being the manufacturer of the so-called “Facebook Phone” the social network is expected to be announced this week?

That is, of course, if anybody actually wants a Facebook Phone. There is serious doubt if that will actually be the case. If nobody wants to buy a phone with tightly integrated Facebook skin, HTC will have spent a significant amount of time and probably a fair amount of money on a project that will see no tangible returns. That can be bad for HTC, a once-proud company with dwindling sales that only has so many bullets it can fire into the Smartphone Wars before its armory turns up empty.

HTC Salsa A History With Facebook

For nearly two years, HTC has been rumored to be working with Facebook in the so-called “Project Buffy.” The project, named after Joss Whedon’s cult TV show Buffy The Vampire Slayer, is supposed to be a smartphone that runs some type of Facebook-styled mobile operating system on custom hardware. Facebook supposedly was looking for hardware engineers and mobile operating system developers to help turn the dream into reality. 

The most likely outcome, as I pointed out in May 2012, was that Facebook would take a kernel from Google’s Android and fork it into its own operating system in the same way that Amazon has done with the Kindle Fire. According to TechCrunch’s Josh Constine, the operating system for the Facebook Phone will be less of a true fork from Android and more of an “application layer” – a skin on Android in the same vein of Samsung’s TouchWiz, HTC Sense and the now-defunct MotoBlur from Motorola. 

HTC has worked with Facebook before. The Taiwanese mobile manufacturer released the “HTC Status” (also known as the HTC ChaCha) in 2011 with a “dedicated Facebook button.” That button was essentially a hardware feature that launched the Facebook Android app. HTC also made the “Salsa” with Facebook buttons that it showed off at Mobile World Congress in 2011. 

You ever see anybody using a ChaCha/Status? Anywhere? Not bloody likely. And that could be a problem for HTC with this new Facebook Phone.

Identifying Consumers

As ReadWrite editor Brian Proffitt wrote this morning, Facebook is going to have a hell of a time trying to figure out who to sell this device to. Businesses won’t want it. Neither will teenagers. 

HTC ChaCha In the smartphone industry, there is a very delicate line for success when it comes to mobile operating systems. Essentially, you need a value play for your core business to make it work. Apple’s value is the hardware and profit margins it reaps. Google’s value from Android is to learn more about its users so to be able to better sell them advertising. BlackBerry traditionally was aimed at enterprises but had no clear advantage for regular consumers, who switched to Android/iPhone when the value became clear. Similarly, Microsoft’s Windows Mobile CE faded when its value proposition (other than merely existing) was eroded by Android/iOS. Microsoft has not been able to build a consistent following of its new Windows Phone products because of that same lack of a value proposition.

Targeting the value proposition will make it difficult for upstarts to enter the field. For instance, what does Canonical really have to offer to consumers that is also of value to its core business with an Ubuntu mobile operating system? Same goes for Tizen or Firefox OS. 

And now, apparently, for Facebook.

Facebook’s play is very similar to Google’s. The more it knows about its users, the better it can serve them advertising. A Facebook Phone would tell the social giant a lot about its users. It could then push users to its contextual Facebook Graph Search and serve them ads through it. Facebook could also integrate its various Android apps (Messenger, Camera etc.) and application store to offer more value and context. 

You know what? Google already does that and probably will do it better. It has been imagining Android and its future for a long time and each successive iteration is better, more contextual and slicker looking than the last. Facebook has neither the experience or the time to match Android. 

That leaves HTC in Lame Duck Limbo.  

ReadWrite writer Brian Hall points out that Facebook might not even need a Facebook Phone. If Facebook lacks an original value proposition, then HTC is going to have a hell of a time trying to sell a Facebook Phone. 

Bring In The Noise, Bring In The Funk

Where does that leave HTC in its battle to regain market share and respectability? 

Basically, to make a lot of noise.

Expect a heavy series of marketing and advertising from both Facebook and HTC about a Facebook Phone. In autumn 2012, HTC said that one of the reasons it had fallen behind was the lack of effective marketing. At the time, we pointed out that HTC’s problems went way beyond marketing. That will likely be the case here as well. It doesn’t matter how much noise a company makes if it is selling a product that nobody wants. 

Top image: Facebook "favorites" from Facebook Mobile.

BlackBerry appears to be back on track. It has stopped losing money like a Hollywood starlet with a crack addiction, finally has new products on the market and a roadmap to grow in 2013 and beyond. Thorsten Heins and company appear poised to stake a claim for what has become the most important spot in the Smartphone Wars.

The Battle for Number 3 

Two different aspects define the Battle for Number 3: platform and product. For platform, Google’s Android and Apple’s iOS are the top two mobile operating systems on the market. When it comes to product, the Apple/Samsung duopoly dominate the shipments of smartphones. 

Then there are the challengers. 

In one corner we have BlackBerry, the erstwhile Canadian smartphone manufacturer formerly known as Research In Motion. Conveniently, its platform and product go by basically the same name. In the other corner we have Windows Phone from Microsoft with smartphones built by the likes of Nokia, HTC and Samsung. Waiting in the wings for their shot at the Battle for Number 3 are upstarts like Firefox OS from Mozilla, Tizen from the Linux Foundation and Ubuntu from Canonical. Considering that none of those would-be competitors actually have a product on the market, we can safely call this a two-horse race between BlackBerry and Windows Phone. 

In the United States, BlackBerry has 5.9% of the platform market share, according to a January report from analytics firm comScore. Microsoft’s Windows Phone has 3.1%. 

For the time being BlackBerry is winning the Battle for Number 3. That may be a little misleading though as BlackBerry’s U.S. market share came from its long tail legacy BlackBerry products, not the new BlackBerry 10 operating system that completely splits from its older products. That also only includes the United States. The U.S. is often indicative of trends in the global smartphone industry but not the tell-all for overall market trends. For instance, Apple’s iPhone dominates in the U.S. but Android claims the No. 1 global operating system with strong growth overseas.

That brings us to more substantive numbers: actual smartphones shipped. In the last quarter of 2012, Samsung shipped 63.7 million smartphones. Apple shipped 47.8 million iPhones. The next three spots on the list all come from Android manufacturers with China-based Huawei in the third spot, Sony fourth and ZTE fifth, according to a January report from research firm IDC.

The goal for BlackBerry and Nokia then is to climb the ladder with their own operating systems to dislodge the Android Army (which also includes the likes of LG, Motorola, Kyocera and several smaller manufacturers). If we look at all of 2012, The Battle for Number 3 comes very close with Nokia, HTC and BlackBerry all within a couple million shipments of one another (Nokia’s strength comes on the tail of its dying Symbian platform). 

Basically, it is wide open. Thorsten Heins and BlackBerry may have steadied the ship, but it still has a lot of work to do to solidify No. 3 in both platform and product. Who will emerge as the winner? That is the topic of this week's ReadWrite Mobile poll. Vote below and let us know who you think will win (and why) in the comments. 

Mobile device manufacturers should pay close attention to a recent settlement between the Federal Trade Commission and HTC, which the Commission claimed had failed to protect customer's privacy and personal data. Rather than affecting only HTC, the agreement is a warning that the commission is finally prepared to hold device makers responsible for securing their products.

How It Started

HTC drew the attention of the FTC by deploying customized software in 22.5 million Android devices that allowed third-party applications to bypass a security mechanism requiring user permission before installation. The HTC software was meant to gather data only to help the manufacturer troubleshoot problems, but its implementation showed HTC was clueless when it came to security.

In investigating HTC's sloppy work, the FTC found a number of poor security practices. For example, HTC had no effective program for assessing the security of products before shipping them to consumers. In addition, engineering staff was not properly trained in security and privacy and there was no testing for security flaws. Also, there was no process for receiving and addressing vulnerabilities found by third-party researchers and academics.

The FTC's findings were listed in a complaint that HTC settled by agreeing to a "comprehensive security program" that includes patching vulnerabilities that could be exploited by hackers and spammers. The agreement is a big deal, because taken together with the original complaint, the FTC has outlined for all device manufacturers what it considers best practices for security.

"To settle the case - the FTC’s first against a device manufacturer - HTC has agreed to a far-reaching settlement that imposes a first-of-its-kind remedy: patching vulnerabilities on millions of mobile devices," FTC senior attorney Lesley Fair wrote in the commission's Bureau of Consumer Protection blog.

Dismal Android Security

Makers of Android smartphones and tablets have created a huge security problem by shipping devices with older versions of the operating system and then failing to quickly update the software with the latest security fixes from Google. This has left millions of customers with devices that contain known vulnerabilities that cybercriminals are working feverishly to exploit.

"It's reasonable to assume that the next thing the FTC will look at is the unpatched vulnerabilities in Android itself that Google has fixed, but where the fixes haven't reached end users either because of the handset vendors or the wireless carriers," Christopher Soghoian, principal technologist for the American Civil Liberties Union, said. "This is probably the most interesting FTC case to come out in the last couple of years."

The rise in Android malware is substantially faster than any other Internet-delivered malicious app, according to Cisco's recent 2013 Annual Security Report. At the same time, cybercriminals are developing better software tools for breaking into Android devices.

In October 2012, the FBI warned that cybercriminals had built a mobile version of FinFisher, commercial spyware sold to law enforcement and governments, to steal personal data from Android phones. Also last year, the first Android botnet was discovered on the Internet, according to Cisco. A botnet is a network of compromised devices used to distribute malware and spam.

The FTC Isn't Alone

The FTC won't be alone in demanding better consumer protection from device manufacturers. Rep. Ed Markey (D-Mass.), co-chair of the bi-partisan Congressional Privacy Caucus, plans to reintroduce this year "The Mobile Device Privacy Act," which would require companies to get the permission of consumers before using any monitoring software on mobile devices.

“With this important settlement, the FTC has sent a strong signal to the mobile marketplace that consumers’ sensitive information must be safeguarded,” Markey said.

With so much government attention on mobile device security, it's clear that manufacturers can no longer treat data protection and consumer privacy as an afterthought. Both will soon have to become a top priority.

Image courtesy of Shutterstock.

HTC may have a winner on its hands – if only people will pay attention.

The Taiwanese smartphone maker announced its new flagship device, the HTC One, at launch events in New York City and London. The events themselves were a little anti-climatic – short, full of corporate cheerleading and lacking anything of real substance. Good thing the quality of the One makes up for HTC’s lack of verve on its own.

HTC president Jason Mackenzie shows off the One.

Hardware Details

With the One, HTC has officially raised the bar for smartphone design, hardware and aesthetics. It is a trim, 4.7-inch device with an aluminum body and a 1080p screen that features 468 pixels per inch (ppi). By comparison, the iPhone 5’s “Retina” display offers 326 ppi, while the Samsung Galaxy S3 features 306 ppi. The One runs a quad-core, 1.7 GHz processor, the Qualcomm Snapdragon 600, and 2GB of RAM. It will come in two varieties – with 32GB or 64GB of storage – and will start at $199 in the United States on a two-year contract from Sprint, T-Mobile and AT&T. The HTC One will begin shipping in late March, according to executives.

HTC One aluminum body case

So, that's the HTC One from a physical standpoint. From a broad perspective, the One will be the best smartphone on the market when it ships later this spring. Nothing from competitors, major or minor, really comes close… yet. We will see how the likes of Samsung, LG, Nokia and Apple compare with their major flagships as the year goes along, but HTC has fired the first salvo in the 2013 Smartphone Wars, and it's an impressive one.

A Content Perspective

The One is more than just a beautiful body and hardcore specs. HTC thought a lot about experience with its new flagship and for once, a smartphone-manufacturer skin laid on top of the base Android operating system doesn't interfere with a quality user experience. 

HTC lead designer Jonah Becker tells the crowd about the One

HTC has updated its Android skin Sense by building on top of successful features from its previous flagship smartphones, the One X and One X+. The One is running Android 4.1.2, which will disappoint many Android enthusiasts hoping that HTC would get in gear and release a smartphone running the most current version of the operating system (Android 4.2.2). Either way, the One still technically runs Android Jelly Bean and most, if not all, users will be hard pressed to figure out the difference. 

The One introduces a unique feature called “BlinkFeed” on the One's home page that serves up social media updates, calendar events, news and other feeds in one area. HTC has partnered with 1,400 media brands that produce up to 10,000 articles a day, including ESPN, Reuters and others.

A glance at BlinkFeed might lead you to think that HTC is aping Microsoft’s “Hub & Tiles” from Windows Phone or the new app panels in BlackBerry 10. That's not really the case. Think of BlinkFeed as a kind of real-time Pulse news reader that updates automatically on one home screen. The One still lets users set up Android widgets and app icons on other home screen panels. 

What The Heck Is An UltraPixel? Finally, An Answer

HTC has introduced what it calls an “UltraPixel” camera that features a new sensor with larger pixels the company claims can capture 300% more light than traditional smartphone cameras, allowing it to take better low-light photos. Of course, “UltraPixel” is a marketing gimmick, although if it even comes close to working as advertised, it would be a decent achievement. HTC also announced a feature it calls Zoe, which allows users to take pictures that includes motion before and after the shutter was snapped. This isn't exactly a new innovation, as both Samsung and BlackBerry offer something like it. But that's not going to stop HTC from emphasizing it anyway.

HTC remains focused on sound quality, offering two front-facing stereo speakers and Beats Audio. HTC calls this package “BoomSound.”

From a first-look perspective, it's hard to think how the One could be improved upon. We'll have a better idea when we get our hands on the device for a full review, but it seems that HTC really set the bar pretty high. 

HTC has been beaten down for more than a year as it tries to turn heads away from the like of Samsung and Apple. If any phone can get people to pay attention, it has to be the HTC One. Then again, quality doesn't always win the war. We'll know by the middle of 2013 if the HTC One is the company's savior... or its last gasp.

Event photos by Dan Rowinski. Product photos courtesy HTC.

HTC has officially announced its newest flagship smartphone, the HTC One, at events in New York City and London. The new 4.7-inch smartphone sports a 1.7 GHz quad-core processor and introduces a concept called "ultrapixels" to improve the the camera. The HTC One has two front-facing stereo speakers and an all-aluminum chassis that should give it a comfortable fit in the palm of your hand.

HTC has also redesigned Sense, its skin that it lays on top of the Android operating system. Integrated into this is a series of live tiles HTC calls "Blink Feed" that will pull in stories and content form social media, brands and new sources straight to the smartphone's home screen. 

The HTC One will launch in 80 countries on 185 mobile operators. This will be HTC's biggest and most wide spread device launch ever.It will begin shipping in late March.

Stay tuned for more coverage of HTC's newest smartphone. 

Lead image: HTC president Jason Mackenzie on stage at HTC launch event in New York by Dan Rowinski

HTC is readying its war machine for its first biggest device launch of the year. Codenamed the HTC M7, the device is expected to be announced at a launch event next Tuesday, February 19th in New York City. We already have a pretty good idea of what to expect.

The HTC One? The M7 is likely to be called the HTC One in the United States. According to gadget blog HTC Source, it will be released to AT&T, Sprint and T-Mobile on March 22nd according to anonymous contacts. It will retail for $199 with a two-year contract.

From professional gadget leaker @evleaks at UnwiredView.com, we have an idea of what the HTC M7/One is supposed to look like as well (pictured right). It will have a 4.7-inch screen with a 1.7-GHz quad-core processor and come in black and white variations. HTC is also likely to perform a significant upgrade to its “Sense” skin that it overlays on top of stock Android to differentiate itself from the likes of Samsung or Google’s Nexus devices. 

In the life of HTC, this will be an important device launch. The HTC M7/One may be its last shot to claim market share in the elite smartphone sector in the developed regions of the U.S. and Western Europe. If the One breaks on the shores of the regions that have been fortified by the likes of Apple and Samsung, HTC will likely have to retreat into creating low-margin devices in developing markets such as China and India and the Pacific rim. 

Commenting on the company’s last quarterly earnings statement, HTC CEO Peter Chou said that the smartphone manufacturer is already making plans to be more aggressive in developing markets. That strategy will work to grease the wheels of HTC revenue (if it can successfully fight off the likes of Huawei and ZTE) but for HTC to truly regain prominence, it needs to make a strong showing with top-of-the-line devices in the U.S and Europe.

If HTC Source’s contacts are to be believed, the first of the company’s major problems that affected its market share in 2012 will be addressed with the launch of the One. Distribution and exclusivity damned HTC’s One X, Droid DNA and One X+ to marginal players among the top U.S. carriers last year. This time around it looks like HTC has managed to strike deals with three of the top four carriers to release the One on March 22, with Verizon releasing at least a version of the device at a later date, according to @evleaks.

In addition to the reported specs listed above, what we know about the M7 at this point is that it will have two front-facing speakers, the upgrade to Sense and possibly a four “ultrapixel” camera. We still do not really know what an ultrapixel is, but HTC seems confident that the new camera on the M7/One will be one of the best in the industry.

We will be live at the HTC launch event in Manhattan next week. Follow @Dan_Rowinski and ReadWrite on Twitter for live updates and come back Tuesday afternoon to get our initial thoughts on HTC’s latest device.

Top image: HTC's countdown to launch.

We are in a new era of photography. The Mobile Revolution has fundamentally changed the nature of how photos are taken, where they are taken, by whom they are taken and, most importantly, how often they are taken. People now take photos of everything and share them to other phones, social media sites and all over the Web. You could argue that the rise of Facebook was predicated on photos and Instagram is now the de facto photo app for millions of would-be photographers. 

The photo has come a long way. From the camera obscura of French inventor Nicéphore Niépce in 1822 to the daguerreotype from Louis Daguerre in 1837, the “Brownie” camera around 1900 and later the invention of the Polaroid in 1947. Photo quality has increased as cameras have become cheaper and more widespread. One of the first camera phones came from Kyrocera in 1999 and by the mid-2000s, almost every flip phone on the planet had a decent camera attached to it.

How Smartphones Changed Photography

The smartphone has caused another paradigm shift for photography. Not only can the masses take lots of pictures, they can take good pictures - and look at them as well - right on their mobile devices. Before smartphones, many people actually used to print their photographs.

The rise of Apple’s iPhone can correlated to its attention to detail in its camera hardware and software approach. Samsung’s BlackJack released in 2006 had a decent camera (even if it was running Windows Mobile CE). Nokia has recently made camera quality a priority with its PureView camera phone and features like Carl-Zeiss optics in its Lumia series.

What The Hell Is An "Ultrapixel?"

Taiwanese smartphone manufacturer HTC wants to remind people that it has also been on the forefront of camera technology. In the infographic below, HTC outlines the history of the camera and its own contribution to the Mobile Revolution. The HTC Incredible was one of the first smartphones with an 8-megapixel camera. 

HTC thinks it is on the cusp of the next great iteration of smartphone photo technology. Its newest smartphone, rumored to be called the M7 and scheduled to be announced on February 19th in New York, is said to have a “4-ultrapixel” camera with an entirely new photo experience. What the heck is a 4-ultrapixel camera? Who knows. I will be on hand for HTC’s announcement later this month and will be sure to figure out if the manufacturer’s claims hold any water.

Check out the infographic from HTC below. Do you buy a smartphone based on its camera capabilities? Let us know in the comments.

HTC has been a brand known for trying to hit the top of the market. Its recent smartphone builds have had slicks designs, top specs and high price tags. The company has focused on consumers with above average incomes in developed markets like the United States and Western Europe.

And has fallen flat. 

Lukewarm Earnings

HTC knows it is in trouble. Its sales are stale and are expected to stay that way, if not worsen. It is facing stiff competition in the middle of the smartphone market from the likes of Nokia and BlackBerry along with a plethora of Asian manufacturers such as LG, Huawei and ZTE. Something needs to give. As such, HTC said today that it would begin producing lower-end smartphones and focus on emerging markets, especially China, according to Reuters. 

HTC announced today that its revenue from Q4 2012 was $2.03 billion ($60 billion New Taiwan dollars). That is down from $2.37 billion (NT$70.2 billion) in Q3 2012. HTC CEO Peter Chou said he expects the results from the first quarter of 2013 to be even worse. Hence, the need to expand its product to different price structures targeted at a different market. 

Having Trouble Competing? Find A New Market

It is not a surprising development. If a company runs out of room to grow in one market, the best thing to do is find another where it can. The U.S has proven itself to be Apple/Samsung centric, a reality that has hit the rest of the smartphone manufacturer industry hard (see the U.S. struggles of Nokia, Motorola, LG and BlackBerry). HTC has a variety of quality devices available in the U.S., including the One X+, Droid DNA for Android and 8X Windows Phone. Anybody looking for quality smartphones could do a lot worse than acquiring an HTC device. 

You can peel away HTC’s problems like so many layers of an onion. Foremost, its brand strength lags behind that of Apple and Samsung. That means that even when HTC comes out with a top quality device, it lacks the excitement and anticipation reserved for new iPhones or Samsung Galaxies. As we have seen with the iPhone, that type of hype and consumer anticipation is very important to a smartphone maker’s bottom line.

HTC also has a logistical distribution problem, especially in the U.S., where its top devices are tied into exclusivity agreements with carriers like Sprint (Evo 4G LTE), One X+ (AT&T) and Verizon (Droid DNA). As we have seen, exclusivity agreements tend to be poor bets for manufacturers looking to make dents in the market. HTC’s declining revenues make it difficult to remedy either of those situations.

HTC’s declining revenue then makes its decision to focus on emerging markets easy to understand. If it cannot keep up with the big boys in the big market, try to make a dent with limited resources in nascent markets. It will still face stiff competition in the likes of China and India, but at least in those regions it can stretch its dollars further than it could in the U.S. 

HTC's new direction does not necessarily mean it will skip the top smartphone markets. The manufacturer is expected to announce its new "M7" Android smartphone at launch events in New York and London later this month. 

Smartphone maker HTC had a down year in 2012. That's not news, the company's troubles have been well documented. Samsung, the playground bully of the mobile industry, basically beat up HTC and stole its lunch money. Apple, that conniving and clever older sister, boxed HTC in to a corner and took whatever what it wanted. 

Yes, Apple and Samsung are HTCs biggest problems. Why? Because they have deeper resources, better distribution and a better position in the minds of phone buyers. They also have better… marketing? At least that's the real problem according to HTC.

Marketing? Really? That's What You Think The Problem Is?

"Our competitors were too strong and very resourceful, pouring in lots of money into marketing. We haven't done enough on the marketing front,” HTC CEO Peter Chou said in an interview with The Wall Street Journal. 

Stop me if you've heard this before. A CEO of a once-powerful smartphone manufacturer addresses a poor year, claims that the company is basically fine and blames the marketing department and budget for undercutting potential sales. 

The RIM Example

Oh wait. We have all heard that one before:

"What we need to get a bit better at here is to have a little bit more of an ear toward the consumer. I want to strengthen this by bringing really good marketing expertise in,” said Research In Motion’s CEO Thorsten Heins when he was announced as the head of the company in January 2012.

RIM would go on to have the worst year in its history - making its previous problems seem like a Golden Age. 

HTC’s problems are not the same as RIM’s, of course. The BlackBerry maker’s major flaw in 2012 was that it did not release a new smartphone to the market and its aging BlackBerry 7 operating system was forced to carry the load while waiting for an upgrade. Most of RIM’s sales in 2012 came from international liquidation of old products ahead of the BlackBerry 10 launch. RIM’s problem was not a failure of marketing, it was a failure to do… anything. 

HTC Has A Host Of Issues

On the other hand, HTC came out with its One series of devices in 2012 which were generally well regarded by the few people that bought them. The Droid DNA on Verizon proved a decent addition to the market at the end of the year. 

HTC’s problems stemmed from a variety of faults. Foremost among them was distribution. Samsung and Apple have both realized that the best way to gain rapid market share is to be everywhere all the time. Samsung typically releases its flagship Galaxy smartphones (including the S 3 and Note II last year) on all four major carriers in the United States and most of the equivalent carriers around the globe.

Apple has worked hard to increase its international and pre-paid market presence and, since the iPhone 4S, sells the iPhone on all three top U.S. carriers (AT&T, Verizon, Sprint). When HTC’s flagship One X came out in May 2012, it went exclusively to AT&T. Lesser One-series phones went to the likes of T-Mobile. Verizon was notably absent from any One-series phones, a gap HTC was slow to rectify until the DNA made its debut. 

Availability Is Key

HTC needs to recognize that its problem not just marketing, but availability. That's no doubt why the company is making a renewed effort in China with the Butterfly - and initial reports are encouraging. According to The Wall Street Journal, HTC sold 2.8 million smartphones in China in the third quarter of 2012. 

HTC launch of the One X was derailed when Apple temporarily won an injunction from the U.S. International Trade Commission blocking sales of the device shortly after it was released. The One X was forced off of AT&T’s shelves for close to three weeks in May/June 2012. HTC never really recovered and later settled its patent disputes with Apple and will pay a licensing fee to Cupertino for smartphones that use Apple's patented technology. 

Patents and distribution. Those were HTC’s biggest problems - not marketing. Failure to create a product intriguing enough to stop the hordes from buying iPhones and Galaxies ranks third. HTC lost ground to budget Android manufacturers ZTE and Huawei as well, so it is not just an Apple/Samsung problem.

Marketing? Sure, that probably played a role in HTC’s overall poor performance, but it was not the biggest contributing factor. HTC’s problems had more to do with logistics than advertising. 

When HTC comes out with its next flagship device (likely to be called some derivation of “M7”) later this year, it needs to get it released on AT&T, T-Mobile, Verizon and Sprint in short order. Build hype through marketing, then win with ubiquity and beauty. 

So, here we are at  the dawn of a new year, once again hearing the “marketing was our biggest problem” story from a struggling smartphone leader. Can HTC avoid what happened to RIM  after Heins made his proclamation? Perhaps, as long it manages to release new smartphones that continue to push the envelope on design and features. 

The news: The U.S. Patent and Trademark Office has declared a huge Apple multi-touch-screen patent - the so-called "Steve Jobs patent" - to be invalid. As CNET adds, this is the second Apple patent to get a smackdown. The previous one was about Apple's "rubber band" effect. Neither ruling is final, but still.

The best analysis: Groklaw, which has been doing amazing coverage of Apple's legal war, writes: "If you want to know why people now hate Apple for its legal swashbuckling, this is Exhibit A."

The conclusion: This whole notion of Steve Jobs launching his "thermonuclear war" on Android is a farce. A sham. A joke. It has been from the start.

Apple Keeps Failing

Apple's claims have been knocked down all over the world. In England a court was so appalled by Apple's claims that it ordered Apple to run ads explaining that Samsung had not, in fact, copied Apple.

Apple appealed, and lost, so the public shaming went forward. Apple brazenly snubbed its nose at the court by creating an ad that taunted Samsung even more. So the court made Apple do it again, and get it right this time.

Yes, Apple won a big case in California. But that too could unravel since the jury appears to have made numerous mistakes. Samsung wants the verdict set aside. The judge is now urging Apple and Samsung to make peace.

Apple, The Knight In Shining (Bogus) Armor

What's especially rich is the way Apple keeps trying to act like this is some noble quest, that the fights aren't about money but rather are about principles and "values," as Tim Cook wrote in a letter to Apple employees after the big win against Samsung last summer. 

Now it appears that Apple applied for and received a bunch of lame (and apparently in some cases bogus) patents, then used them to launch a cynical war that it hoped would slow the progress of Android. 

Apple is using lawyers and courtrooms to do two things:

First, Apple is using lawsuits as a form of marketing, a way to generate headlines and smear rivals as copycats, while depicting Apple -- pure, noble Apple -- as the font of knowledge from which all innovation flows.

Second, Apple figures it can outspend its rivals and beat them into submission with bogus claims, tie them up with expensive litigation and distract them.

This is not what courts are for. Nor is it what patents are for. This is despicable behavior.

The Plan Has Backfired

What's worse, it hasn't worked. Android now has 75% share in smartphones, versus 15% for Apple. Android is also chipping away in tablets, where Apple's share has dropped to 52%.

Steve Jobs's big "thermonuclear war" has backfired in every way. Apple is the one that has become distracted, while Google keeps chugging away.

Apple had hoped to come out of this looking like a hero. But now, as another of its patents gets struck down, Apple instead looks like a bully -- and a ridiculous, toothless one at that.

Microsoft has long been a company that relies on its manufacturing partners to spread its Windows operating system. That has been true for Microsoft’s mobile efforts as well, partnering with companies like Samsung, HTC and Nokia for its Windows Mobile CE and Windows Phone platforms. So when Microsoft decided to build its own Windows 8 tablet - the Surface - speculation increased that the company would take a similar route and build its own smartphone. Would Microsoft really be willing to jeapordize its strong ties to its smarpthone partners, like Nokia, and dare to enter the market on its own?

The answer, according to Taiwanese news site DigiTimes, is yes. According to DigiTimes sources, both Amazon and Microsoft have placed orders with Chinese gadget manufacturer Foxconn International Holdings (the same company that builds the iPhone for Apple) for small batches of their own smartphones to be shipped in the middle of 2013. 

It is important to note that, as far as smartphone rumors are concerned, DigiTimes is not always to be trusted. The publication has long been a source of unsubstantiated rumors that light fires under hype cycles for new devices, especially those from Apple like the iPad and iPhone. But for a number of reasons, I'm not ready to completely ignore this rumor. 

Microsoft Not An Unlikely Manufacturer

While it is only speculation at this point, the notion of Microsoft creating its own smartphone is not as far-fetched as some might think. (For one thing, speculation on the topic has been running for months, see A Surface Smartphone From Microsoft? Yes, Please!) After all, against the industry’s better judgment, Microsoft did create its own tablet in the Surface and has thrown a huge marketing budget behind it. Also, if DigiTimes is correct, the order size for Microsoft is not large. Microsoft may not be jumping into the deep end of the smartphone manufacturing pool, but may be ready to dip a toe in the water. 

Mobile analyst Chetan Sharma comments that Microsoft building its own smartphones is a way to both keep the pressure on its manufacturing partners to perform at high levels and hedge its bets by preparing for a possible future of vertical integration (designing and building its own smartphones in the same way Apple does). 

“So, if you connect the dots, it is not inconceivable that Microsoft will come out with a smartphone that A) forces OEMs to come out with their best in rapid cycles and B) keeps them in the game if they have to resort to a vertical strategy at some point in the future,” Sharma wrote in an email to ReadWrite. “It is the same dilemma that Google faces. The Nexus line of products is to keep the pressure on the OEM partners as well as prepare for a possible vertical strategy down the road.”

HTC 8X Microsoft's Manufacturing History

Microsoft is not a complete stranger to building its own devices. It manufactures the popular Xbox video game console and has delved into mobile devices in the past - notably the ill-fated Zune and the disaster that was the Kin phone.

If Microsoft were to make a limited-run Windows Phone device it would likely take a similar route to how Google creates its Nexus devices, which are ostensibly the flagship Android smartphone and tablets that are supposed to be the benchmark for how other manufacturers model their devices. The difference between the Nexus devices and Microsoft making its own flagship smartphones is that Google has its manufacturing partners build the devices for them. The Nexus 4 smartphone is made by LG while the Nexus 7 is made by Asus and the Nexus 10 by Samsung. 

The motivation for Microsoft (and to a lesser extent, Google and Amazon) to build their own devices rests just west of San Jose: Cupertino. The Apple iPhone juggernaut has given many mobile manufacturers pie-eyed dreams of being able to integrate vertically and reap the benefits.

“Microsoft (and Google) have also seen the vertical model of Apple succeed beyond their imagination and view it with envy,” Sharma said. 

Potential Pitfalls

The problem that Microsoft has is that its entire mobile strategy is built on shaky ground. Windows Phone 8 engenders some loyalty among users and it is considered creative in relation to iOS and Android. But, it is not selling well. That is despite Microsoft CEO Steve Ballmer’s comments last week that it was selling four-times better than last year. Thing is, Microsoft sold only a scant 1.7 million Windows Phones in Q3 2011, so four times that is still not much to brag about in relation to Android and iOS. 

Microsoft’s two primary partners for the Windows Phone 8 launch are Nokia and HTC. Microsoft has invested a lot in Nokia to be the flag bearer for Windows Phone and at this point it should be doing everything it possibly can to buoy Nokia until it can once again stand on its own. (That may not be easy, see ReadWrite DeathWatch: Nokia.) HTC has its own problems, losing market share to Samsung and reporting scant earnings in its last quarter. 

Nokia Lumia 920

“They do need to do something to kick start Windows Phone adoption, as its still a meager part of the market. But if they produce a phone, it will hit Nokia in particular really hard,” Jack Gold, principal analyst at J. Gold Associates said in an email. “Nokia is struggling to regain market share, and anything Microsoft would take away from them would be very painful. So I think Microsoft will tread carefully here, as it would be a balancing act between accelerating the market, and hurting your vendors (particularly Nokia but also HTC).”

Microsoft’s position is more precarious than Google’s when it comes to its manufacturing partners. There is little Google can do to hurt most of its partners, short of withdrawing the open source license for Android and consolidating all of its manufacturing to its Motorola subsidiary. Microsoft, on the other hand, could do great damage to Nokia by building its own smartphone. At this point, there are just not enough Windows Phone sales to support the ecosystem. Taking any of those sales away from Nokia could well end up being the straw that broke the camel’s back. 

Unlike the Surface tablet, which had no set market and didn't compete with any manufacturing partners before its release, Windows Phone already is established with manufacturing partners trying to use it to claim mobile market share. Nokia's entire business is focused on Windows Phone. The potential for collateral damage from a Microsoft-built smartphone is much greater than it was for the Surface. 

So, back to the original question. Does Microsoft dare enter the smartphone manufacturing game, when doing so could bury the already fragile Nokia? Or limit the potential of the fading HTC? Or does the vague promise of a Surface-like flagship Windows Phone and/or complete vertical integration outweigh those factors?

I don't have any inisght into what Micosoft execs are thinking, but I think they will go for it.

Images from Microsoft, HTC and Dan Rowinski.

Last week, a friend of mine called from the Verizon store. His girlfriend was looking for a new smartphone and wanted my opinion on what she should get. The choices were the iPhone 5, the Samsung Galaxy S III and, “something from HTC.”

I cringed. HTC has not had a desirable device on Verizon for a long time. The option presented was the Rezound, the successor to the flawed Thunderbolt and already a year old. When asked if she should consider the Rezound, my response was, “oh god, no.”

Verizon is the largest cellular carrier in the United States - and the one that sells the highest proportion of Android devices. The fact that HTC has had nothing worth worth buying on the carrier for basically all of 2012 has been a major problem for HTC.

The Droid Incredible 4G LTE was an also-ran device for HTC on Verizon, a reprise of a past hit updated for 4G LTE. Verizon passed on HTC’s flagship One series - it went to AT&T. Sprint remodeled the One X to be the EVO 4G LTE. Verizon stuck with its aging HTC models even as it released new devices from the likes of Motorola and Samsung.

About Time For A New HTC Phone

On Tuesday, HTC finally announced a new top-of-the-line smartphone, exclusive to Verizon. The Droid DNA is a 5-inch Android 4.1 Jelly Bean device that HTC dubs as “the ultimate smartphone.” It’s screen packs a pixel per inch rate of 440 (quite a bit higher than the iPhone’s 326 ppi), an 8 megapixel camera, Beats Audio with a 2.55 volt headset amplifier, 2020 mAh battery and a 1.5 GHz quad-core Snapdragon processor. The Droid DNA will run HTC’s Sense 4 Android skin on top of Jelly Bean. It will be available for $199 on a two-year contract from Verizon starting Nov. 21. 

The 5-inch screen may be a touch excessive for some, but otherwise the DNA is everything an Android fan might want from a smartphone. Whether or not it lives up to HTC's marketing blather,  “the ultimate smartphone” is indeed quality competitor on Verizon.

That's critical for a comany whose numbers have been abysmal over the last two quarters. HTC's revenue in the third quarter was 23% down from the second quarter and 48% down from Q3 2011. The manufacturer has not gained traction with the One X or the Evo 4G LTE, and the lack of a decent option on Verizon has been even more damning. The most lucrative market of Android users in the U.S. has been essentially lost to HTC for the better part of 12 months. 

Will the Droid DNA be enough to reverse HTC's downward trend? Not entirely.

This holiday shopping season has more great mobile devices to choose from than ever before. But expanding its distribution channels with high quality devices has to be one of HTC’s first priorities as it begins climbing back towards the top of the smartphone ladder. The Droid DNA is a good step in that direction. 

In a sign that Apple may be ready to drop its insane jihad against Android handset makers, Apple and HTC have announced they are dropping all legal claims against one another, ending a bitter two-year court battle that has involved numerous lawsuits in courts around the world.

Apple and HTC have struck a 10-year global licensing agreement that "extends to current and future patents held by both parties," an HTC press release said.

Could this mean Apple is sick of being the world's biggest (and least successful) patent troll? Let's hope so.

The two companies did not release terms of the settlement. The press release contained canned statements from Peter Chou, CEO of HTC and Tim Cook, CEO of Apple. Chou said HTC "can focus on innovation instead of litigation," and Cook said Apple "will continue to stay laser focused on product innovation."

Apple sued HTC in 2010 as part of a wider legal assault on Android phone makers. Apple's late CEO Steve Jobs had vowed to wage "thermonuclear war" against Android, which he considered to be a knock-off of Apple's mobile operating system.

An End To Apple's Legal War?

Does Apple's settlement with HTC indicate that Cook doesn't share Jobs's hunger for vengeance? It certainly looks that way. Certainly Cook is more pragmatic and less emotional than Jobs was. 

And the truth is, Apple's lawsuits are mostly ridiculous, and have mostly failed. In one case against HTC, all of Apple's claims but one were tossed out, and the one that survived was so trivial that HTC created a work-around in a week.

In other words, Apple has been wasting money and energy (not to mention harming consumers) by pursuing a quixotic crusade launched by its late founder and CEO.

Cook seems to realize this. 

He might also realize that he is fighting the tide when it comes to Android. It's worth noting that this settlement occurred not long after the latest damning IDC numbers came out showing that Android is now outselling Apple five-to-one in the smartphone market, and that Android is also surging in tablets.

All We Are Saying Is Give Peace A Chance

The biggest question is whether this settlement with HTC signals more settlements to come with rivals like Motorola and Samsung. Those fights, particularly the one with Samsung, have been more bitterly fought than the one with HTC.

So in those cases it may be more difficult to bury the hatchet. But for the sake of customers, let's hope Apple can drop the pointless warfare and do the right thing.

Image coutesy of Reuters.

By many accounts, HTC is the third best smartphone manufacturer in the world. It creates quality devices that consumers like and can go toe-to-toe with anything that rivals Samsung, Apple, Motorola or Nokia throw at it. Yet HTC is slowly dying. As the company's profits are whittled away, the likes of Apple and Samsung are building an impenetrable duopoly at the to of the market. 

Sure, the HTC One series sits at the very top of the smartphone market and HTC's Windows Phone 8 devices rival the quality of those from Microsoft's preferreed partner Nokia. But HTC is struggling to sell those devices and continues to lose money quarter after quarter - even as Apple and Samsung just grow stronger.

Headed For A DeathWatch?

The question is whether or not the decline is irreversible. Is HTC one strong quarter away from being a major player again? Or is it a couple more poor quarters away from earning a dreaded spot on the ReadWrite Deathwatch list?

HTC's margin for error continues to shrink. For the third quarter, HTC’s revenue fell 23% from the second quarter and 48% from Q3 2011. Its operating profits were just $167 million, down 76% from the same quarter a year ago. (At least it wasn;t a loss, though.)

HTC’s profits have taken a hit due to failed investments, such as Beats Audio and ImageSense, that have failed to entice users away from competitors. HTC also has not released a major device since the HTC One X on AT&T and the EVO 4G LTE on Sprint in May/June. The release of the One X was held up by a patent injunction from Apple, which significantly reduced sales and the company’s second-quarter profit. By the third quarter, consumers were beeing wooed by the Samsung Galaxy S 3 and then the iPhone 5 - and HTC didn't have anything new to offer as we approach the critical Holiday shopping season.

HTC's Strengths & Weaknesses

The HTC One series are high-quality devices. The company has spent significant marketing dollars in the U.S. (if not quite as much as Samsung and Apple). The company shipped 7.3 million smartphones last quarter, according to IDC, good for fifth behind Samsung, Apple, RIM and ZTE.

But HTC's profit margins are dangerously low. In the third quarter, its margins were 7% and its margins are expected to be around 1% for the holiday season. That makes it difficult for HTC to mount effective marketing campaigns around new devices or spend big bucks on meaningful partnerships able to cut into Samsung and Apple’s lead. HTC’s measly profits come down to three factors:

1. Poor investments that have not acquired new users.
2. Lack of an aggressive deployment strategy for its high-end smartphones.
3. The fact that Apple and Samsung eat the lion’s share of global smartphone revenue.

The first two problems can be remedied if HTC is smart with how it develops its next series of phones and pushes them out to cellular carriers. And that will help with the third problem, too.

A Dangerous Situation

The Apple and Samsung duopoly at the top of the smartphone market is not just dangerous for HTC, it spells trouble for every other smartphone maker. Nokia and RIM – two companies that have fully earned their Deathwatch positions – have already felt the pain of competing with the iPhone and Galaxy devices.

This is no longer an Android versus iOS issue. This is about whether or not there will be room for any smartphone makers apart from Apple and Samsung. Consumers like choice, especially when it comes to top-of-the-market devices. Competition creates diversity and diversity begets creativity and innovation. If the entire mobile ecosystem comes down to a profit race between Samsung and Apple, the whole market will likely suffer.

So, does HTC have a chance to turn things around? The Apple and Samsung duopoly looks strong for the short term. So as of today, HTC is on notice: Find a way to become relevant again or the Deathwatch awaits.