HTC's stock has sunk so low that its entire market capitalization is now worth less than the cash it has in the bank. In layman's terms, that means that if you could theoretically acquire all the shares of HTC, it would cost you less than the cash HTC holds—meaning HTC would effectively be paying you to acquire the entire company. In investors' terms, it means people think the company is essentially worthless.
That seems counterintuitive. Back in 2008, HTC sold more smartphones worldwide than Samsung did. It was the biggest Android seller on the planet. HTC isn't a leader now by any stretch, but it still makes one of the best Android phones on the market, the HTC One M9, which has gotten across-the-board good reviews. It has a 3.4 percent market share in the US. Again, not massive, but the phone business is huge, and 3.4 percent is a decent enough chunk to build a business with.
So why has HTC's stock crashed so low that the company now looks ripe for a hostile takeover by investors who simply want that cash? This one statistic tells you all you need to know about why the Android business is so brutal: The Android manufacturer LG makes an average profit of only 1.2 cents per phone. A penny per phone!
That number comes from LG, which reported results in July. HTC's numbers will be slightly different, but they will not be much different. HTC runs at a loss, which means HTC spends more to make a single phone than it can get by selling it. HTC is basically paying people to take its phones right now. That has had this effect on HTC stock:
It won't get better soon, either. Android manufacturers are in a price war against one another. Androids are only getting cheaper. Google for instance is relaunching Android One in India at just $50. Samsung has the exact same problem as HTC. The Galaxy S6 (and S6 Edge) and its coming Note 5 look like some of the best phones ever made. Yet Samsung's second-quarter results looked like this: Sales dropped 7% from 52.35 trillion won in Q2 2014 to 48.54 trillion won today.
All the Android makers are struggling with the basic problem seen in the below graphic showing the various Android phones on the market:
That is a ridiculous number of different Android devices. Nobody needs that level of choice.
If you go to OpenSignal, the site that published this chart, you'll find it is interactive. Wave your mouse over the little squares and it will tell you which device each square represents. Some of these units are bonkers: HTC sells the HTC One, HTC One M8, HTC One X, HTC One XL, HTC One Mini, and so on and so forth. Nearly 50 different models, of which 49 are also-rans. And it's competing against Samsung, which has even more models you've never heard of.
Android makers seem to think the best way to succeed is just to make as many different types of slightly incrementally different devices as possible and hope for the best. So one way to interpret HTC's fortunes is to say there is an obvious level of overcapacity in the Android business, and it is time to see some consolidation. Some of these companies need to die. About 90 percent of all their brands need to be killed. Android companies need to concentrate on making one or two really excellent phones and tablets and let the devil take the hindmost.
It looks as if HTC may be the first to go.