Is HTC giving up on Windows Phone?

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Jason

Windows Phone is moving up in the world. Sales of smartphones running the Microsoft (NASDAQ:MSFT) mobile operating system outpaced BlackBerry (NASDAQ:BBRY) device sales for the first time ever during the second quarter of 2013, research firm Gartner reported this week. Consumers across the globe purchased 7.4 million Windows Phone devices in the second quarter, up from 4 million in the year-ago period and corresponding to 3.3 percent smartphone market share, Gartner said. Embattled BlackBerry saw its sales slip from 8 million in the second quarter of 2012 to 6.2 million in the most recent quarter, and its market share plummeted from 5.2 percent a year ago to just 2.7 percent.

Credit Windows Phone's growth to Nokia (NYSE:NOK). Sales of the manufacturer's Windows Phone-powered Lumia smartphones increased 112.7 percent year-over-year, even if its total second-quarter device sales fell from 83 million units to 61 million, in part due to shrinking consumer demand for feature phones. "With the recent announcement of the Lumia 1020, Nokia has built a wide portfolio of devices at multiple price points, which should boost Lumia sales in the second half of 2013," said Gartner principal research analyst Anshul Gupta.

Insiders say Nokia currently accounts for 80 percent of all Windows Phone unit sales, followed by Samsung Electronics, while HTC--once the alpha dog among Windows Phone vendors--has seen its share of the market dwindle below 5 percent worldwide. Now DigiTimes is reporting that HTC is "likely to drift away from Windows Phone" in favor of going all in on Google's (NASDAQ:GOOG) Android. Industry sources say that HTC is already re-thinking its Windows Phone strategy and shifting more of its attention to its Android efforts.

While it's important to stress that the DigiTimes report is based on rumor and hearsay, it does raise legitimate questions about HTC's future and the commercial viability of the Windows Phone platform as a whole. Assuming the report is correct and HTC does halt its Windows Phone initiatives, the company looks to be jumping from the frying pan into the fire--if it can't make headway in the less contested Windows Phone device market, how can it expect to survive in the ultra-competitive Android space? But there's also the distinct possibility that Windows Phone is simply too small and too far off the consumer radar to support more than a few manufacturers. Let's not forget that despite its gains, Windows Phone still represents only 3.3 percent of the smartphone market: That's almost nothing compared to Android at 79 percent or even Apple's (NASDAQ:AAPL) iOS at 14.2 percent. HTC must decide whether it's better off as a not-so-big fish in the Windows Phone pond or as a minnow in the Android ocean--and whichever option it chooses, an uphill battle lies ahead.--Jason

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