Microsoft Adds Insult to Injury

As if things weren't gloomy enough for far-fallen Taiwanese OEM HTC, software giant Microosft (Nasdaq: MSFT  ) is now adding insult to injury.

The gadget maker recently disclosed that sales in May fell 26% year over year and subsequently slashed its second-quarter guidance by 13% to about $3 billion because of weak sales in Europe and the United States. It's also eating a one-time write-off on old inventory. Shares are down 69% over the past year, not unlike another flailing smartphone player we all know and love.

HTC continues to attempt to rebrand itself and slim down its product line, taking cues from this Apple (Nasdaq: AAPL  ) lesson of the day on product depth. This new strategy is embodied by its new One family of Google (Nasdaq: GOOG  ) Android smartphones, which are no slouches in the spec department. The top-of-the-line One X carries NVIDIA's (Nasdaq: NVDA  ) quad-core Tegra 3 in the international version and a Qualcomm (Nasdaq: QCOM  ) dual-core Snapdragon S4 in the domestic model, the latest and greatest chips from each chipmaker.

Source: HTC. HTC One X.

Source: HTC. HTC One X.

According to a recent Bloomberg report, Mr. Softy is looking to block HTC out of the next generation of Windows 8 gadgets. Microsoft is allegedly concerned with HTC's ability to sell a lot of devices and that its tablet experience is lacking, although it offers a few Android tablets.

Windows 8 has a better chance of challenging the iPad's tablet dominance than Android's underwhelming tablet performance thus far.

HTC has also seen product delays stateside and isn't able to corner its supply chain as well as larger competitors. Early discussions seemed to have broken down as HTC wanted to modify the operating system, much like the plethora of Android customization layers that OEMs overlay on top of that OS, but Microsoft put down its foot.

For the flavor that will support ARM Holdings-based chips, Windows RT, Mr. Softy is being pretty picky about who gets in on the ground floor to ensure a consistent quality experience. The company is going with OEMs that have better tablet experience and can handle high-volume sales, even as HTC was one of the early hardware partners for Windows Phone.

Looks like HTC will have to stay cozy with Android for the time being.

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Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Qualcomm, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Google, Apple, NVIDIA, and Microsoft, writing puts on NVIDIA, and creating bull call spread positions in Microsoft and Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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