HTC (OTC:HTCCY) just unveiled the HTC Desire Eye, an unusual "selfie" phone equipped with the most powerful front-facing camera ever.
The 5.2-inch phone has two 13-megapixel cameras -- one on the front and one on the back -- and is powered by the same quad-core Snapdragon 801 processor and 2GB of RAM as the flagship One M8. However, the Desire Eye has a plastic body, instead of the M8's metal chassis, is waterproof in three feet of water, and comes in a wider variety of colors -- white, red, and blue.
The Desire Eye will also be the launch platform for the HTC Eye Experience, a face-tracking feature which HTC states will keep up to four faces "perfectly framed at all times" for photos. Other interesting additions to the device include a "double selfie" to simultaneously photograph a user and the landscape, a "voice selfie" which lets a user take a picture by saying "say cheese", and a "crop me in" feature which merges the front image with the rear one -- which HTC claims will allow a user to take "more extreme" selfies.
The Desire Eye is notably branded as a mid-range device, although it has comparable specs to high-end devices like Samsung's (OTC:SSNLF) Galaxy S5. HTC hasn't announced the release date or price for the Desire Eye, but PC Advisor expects it to launch for £300 to £400 ($484 to $645) in the U.K.
But despite HTC's repeated use of the word "selfie" to generate buzz for the Desire Eye, investors are probably wondering if this phone will finally break HTC's losing streak in smartphones, or quickly be forgotten?
The business of the selfie phone
To understand why we're suddenly seeing "selfie phones", "selfie sombreros", "selfie drones", and even a new ABC TV show called Selfie, we should take a look at search interest in the term from January 2013 until now, according to Google Trends:
Therefore, slapping "selfie" on products would be a natural marketing move, but is there any proof that calling a device a "selfie phone" will boost sales?
I seriously doubt it. Apple's (NASDAQ:AAPL) iPhone 6, which sold 10 million units in three days, has an underwhelming 1.2-megapixel front-facing camera. Its main rival, Samsung's Galaxy Note 4, has a 3.7-megapixel one. Together, Apple and Samsung control 37% of the world's smartphone market, according to IDC, and they did so without massive front-facing cameras.
But Microsoft (NASDAQ:MSFT), which only controls 2.5% of that market, believes in "selfie phones" as much as HTC. Microsoft recently promoted its new mid-range Lumia 735 as a selfie phone, highlighting its 5-megapixel front-facing camera with a wide-angle lens. Sony (NYSE:SNE), another industry laggard which only controls 2% to 5% of the market, has also launched a selfie phone called the Xperia C3, which is also equipped with a wide-angle, 5-megapixel front-facing camera. The Lumia 735 will cost around $288, based on its European launch price, while the C3 costs around $300 in India.
It's fairly obvious that HTC, Microsoft, and Sony's sudden interest in selfie phones is a desperate attempt to get their devices noticed by piggybacking on a hot search term. But getting noticed in today's saturated smartphone market is really half the battle -- since the premium market is controlled by Apple and Samsung, while the mid to low-end market is being gobbled up by Chinese rivals like Xiaomi.
Understanding HTC's woes
If Microsoft and Sony's selfie phones fail, their core businesses will survive, since they are both well diversified beyond smartphones. HTC, on the other hand, relies completely on smartphone sales.
Over the past three years, HTC's market share in smartphones fell from 9.3% to 2.5%, according to Gartner. Competition from Samsung and Chinese competitors, poor marketing decisions, product delays, and several high profile executive departures all exacerbated that decline. Between fiscal 2011 and 2013, the company's annual revenue plunged 56% from NT$465.8 billion ($15.45 billion) to NT$203.4 billion ($6.75 billion).
Last quarter, HTC's revenue fell 11% year-over-year to NT$41.9 billion ($1.38 billion). On the bright side, its posted a profit of NT$640 million ($21 million) -- mainly due to cost-cutting measures and one-time gains -- topping Bloomberg analyst expectations of NT$501.6 million ($16.5 million).
A Foolish final thought
Since revenue growth is clearly HTC's main problem, the company is using a scattergun approach to find new sources of growth beyond smartphones. The company recently unveiled the Re action camera, will launch the Nexus 9 tablet this month, and plans to sell a smartwatch next year. Of these efforts, the Nexus 9 is the most promising, since its Google branding should help it sell better than the company's previous tablets, the Flyer and Jetstream.
However, the Desire Eye won't move the needle when it comes to smartphone sales. It's too similar to the HTC One M8, costs more than the Lumia 735 and Xperia C3, and its only notable advantage over comparable devices is its 13-megapixel front camera. In my opinion, people like to take selfies -- but not enough to buy phones specifically designed for that purpose.