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Friday, August 03, 2012, 11:38 am PT (02:38 pm ET)

HTC revenues down 27%, blames competition

HTC lowered its guidance after missing analysts' expectations and reporting a 27 percent drop in revenues and a 57 percent drop in operating profits. The company's slide is being blamed on increasing difficult competition in the smartphone arena.

HTC was once a rising star, posting regular sales gains as a primary, higher end Windows Mobile licensee. It then partnered with Google in 2008 to introduce the first Android phone, Dream/G1, and has since continued to produce both Android and Windows Phone 7 models.

However, unlike Samsung, HTC primarily makes only higher-end smartphones, putting it into direct competition with Apple, the only other mobile vendor focused exclusively on the premium smartphone market.

HTC has also streamlined its product mix to be more like Apple, creating the "HTC One" to replace a series of confusing, overlapping smartphone models.

While Samsung recently reported sales of twice as many smartphones as Apple, it earned only half as much money because the company relies upon sales of low end models. Of the 52 million devices Samsung was estimated to have sold, only 10 million of those were its top of the line Galaxy S III.

All of the 26 million smartphones Apple sold were iPhones, and most of those were the newest iPhone 4S.

HTC continues to cite "intensified competition in the smartphone market" as a primary threat, noting that it plans to "strengthen execution to get ahead of competition" and "deliver a comprehensive range of products to offer customer choice."

Also faces legal action

In March 2010, Apple engaged HTC in a patent dispute with the US International Trade Commission, asserting more than 20 patents and asking for a injunction against HTC's infringing products.

HTC subsequently paid $300 million for a stake in S3 Graphics hoping to use the company's patent portfolio to defend itself from Apple, but the iPhone maker was not found to infringe upon those acquired patents. HTC then acquired two patents from HP that it is using to countersue Apple.