HTC (NASDAQOTH:HTCCY), which has been marginalized in the smartphone market over the past three years, is adopting a new strategy to win back consumers: waterproof smartphones and cameras.
HTC's newest smartphone for the Asian market, the HTC Butterfly 2, resembles a waterproof variant of its flagship HTC One M8. The Butterfly 2 offers the same 5-inch screen, 2GB of RAM, and 16 or 32GB internal memory, but it sports a slightly faster 2.5Ghz quad-core processor and replaces the One M8's dual four-megapixel depth-sensing camera with a standard 13-megapixel camera. The device, which started launching across Asia in early September, is also known as the HTC J Butterfly HTL23 in Japan.
On the action camera front, HTC recently teased a video of a waterproof camera that will be unveiled on Oct. 8. Earlier reports suggested that the device, dubbed the "ReCamera", will be a periscope-shaped device and use a GoPro (NASDAQ:GPRO)-style wide-angle lens to record 16-megapixel video.
Waterproof devices are interesting new additions to HTC's product line, but investors are probably wondering if they can help reverse the company's decline. Ultimately, I doubt a new waterproof smartphone and action camera will do much for HTC in the long term.
Why waterproof smartphones don't matter
In 2011, HTC controlled 9.3% of the global smartphone market, according to Gartner. However, intense competition from Samsung (NASDAQOTH:SSNLF) and Chinese competitors, bad marketing decisions, delayed product launches, and a series of high-profile executive departures caused its share to plunge to 2.5% today.
Sony (NYSE:SNE), which only controls 3.5% of the smartphone market due to similar reasons, started promoting waterproof phones last year with the launch of the Xperia Z. Sony continued this trend with the Z2 and Z3, and Samsung joined in with the waterproof Galaxy S4 Active, S5, and S5 Active and Sport phones.
Despite this sudden manufacturer interest in waterproof phones, there's no evidence that consumers actually care about the feature. A recent survey by IDC's ConsumerScape 360 found that waterproofing didn't rank among the top 10 purchase drivers for smartphone buyers. Instead, battery life, ease of use, operating system, touchscreen responsiveness, and screen size were considered the top five deciding factors in smartphone purchases. Meanwhile, a survey of over 3,300 readers by PhoneArena in August found that only 37% of respondents wanted a waterproof device.
Therefore, HTC could promote the Butterfly 2 as its first waterproof phone, but it simply won't move the needle at all. Sony didn't gain any market share after touting its Xperia Z devices as waterproof, while Samsung's global market share plunged from 32.3% last year to 25.2% in the second quarter, according to IDC.
Why the action camera market could be a tough bet
GoPro controls 47.5% of the action camera market, according to IDC. Its closest competitor is Sony, which only controls 6.5%. The rest of the market is being fragmented by new competitors including Polaroid and Ricoh.
Many competitors take the same approach to disrupting GoPro's business -- offering comparable or better products at a lower price. GoPro's HERO3+ Black Edition, which has a 12-megapixel camera, costs $400, but Polaroid's XS100i, which only costs $180, is equipped with a 16-megapixel camera. Both devices are waterproof, and can record for 1.5 to 2.5 hours on a single charge.
Ricoh's new $300 WG-M1 is also waterproof and has a 14-megapixel camera. Neither product will kill GoPro, but a flood of similar devices will lower price expectations among consumers, forcing GoPro to reduce its prices to remain competitive.
It will be hard for HTC to compete in this market for two reasons -- its reputation as a smartphone maker and its core strategy of selling higher-end devices. Even though the HTC ReCamera might be compatible with other Android devices, its branding will inevitably remind consumers of Samsung's Gear watches, most of which need to be paired with Samsung smartphones. Therefore, non-HTC owners might avoid buying the ReCamera. Meanwhile, if HTC prices the ReCamera with the same high-margin goals as its smartphones, it could be crushed between cheaper challengers and GoPro.
A periscope shape might help the ReCamera stand out in the market, but HTC will have to promote and price the device perfectly for it to survive.
A Foolish final word
HTC wants to launch a waterproof smartphone and an action camera for one simple reason: it desperately wants to stand out from the crowd. In that regard, it's in the same boat as Samsung, which unveiled six smartwatches, a curved glass phone, and a virtual reality headset over the past year. But unlike Samsung, HTC no longer has the brand recognition to support these products, and they simply won't do anything to address the company's core problems in its ailing smartphone business.
Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.