Low-profile HTC is a powerhouse

HTC may be the most successful cellphone company you've never heard of.

Like Motorola and Nokia, the Taiwanese company designs, builds and sells wireless devices to carriers around the world. But its name — short for High Tech Computer — is barely recognizable to consumers because the carrier's brand, such as Cingular, Verizon or T-Mobile, are on its devices rather than its own.

Despite its low profile, the company is becoming an industry powerhouse with an increasingly growing impact on the market. It has developed some of the most notable cutting-edge phones and handheld devices this year.

Recent examples include the Cingular 3125, nicknamed STRTRK (pronounced "Star Trek") for its sleek flip-phone design, and the T-Mobile Dash, a slim, velvety-smooth handheld with a full keyboard.

Today, it is releasing the Cingular 8525, a device with a slide-out keyboard that is the first to run on Cingular's fastest broadband network.

The company, which has its U.S. headquarters in Bellevue, specializes in making devices with powerful operating systems and differs from other manufacturers, which sell phones designed mostly for the mass market.

And because it uses Microsoft's Windows Mobile operating system almost exclusively, it has the distinction of being the largest manufacturer of Windows devices in the world.

The long-standing relationship with Microsoft started to pay off more recently with the release of Microsoft's Windows Mobile 5.0 operating system last summer. In 2004, HTC shipped only 3.73 million handsets.

Last year, that figure grew to nearly 7 million and will reach an estimated 10 million this year.

To continue the strong growth, HTC opened the Bellevue office last year to support Microsoft and to strengthen ties with Cingular and T-Mobile, which also have major operations here.

In the past year alone, the Eastgate office has expanded from three to 40 workers and could easily reach 100 by year end if it keeps hiring at the rate of five to six job offers a week, said Todd Achilles, vice president of sales and marketing with HTC Americas.

Future hires include a 12-person engineering team to drive some of the highest-level industrial design work for the company. The team is expected to push the boundaries for creating devices for new networks capable of high broadband speeds. Products could include devices that mimic miniature, long-battery-life laptops that can make phone calls.

The market for them doesn't exist today, but they are tentatively labeled ultramobile PCs and could be sold as early as next year, Achilles said.

HTC isn't an overnight success.

Peter Chou, the company's Taiwan-based chief executive and president, was in Seattle last week and described HTC's beginnings.

The company began in 1997 with a handful of people from the computer industry. Chou said computers were then becoming a commodity that anyone could duplicate. The next wave of innovation, he thought, would be in handheld devices.

"We wanted to invest in the future, not work on the existing technology," he said. "We were really excited about the handheld devices. It was very convincing to us, even though the products out there weren't convincing yet. But we looked at the potential that these handheld devices could be really powerful."

Chou knew the devices would be even more useful if they had wireless capabilities. Within the first year, HTC had its first prototype of a personal digital assistant (PDA). It was that device, Chou said, that caught the eye of Microsoft at Comdex, then the industry's leading trade show. Subsequently, the seven-person company was invited to visit Redmond, where the two parties hit it off.

A couple of months later, Chou said, Microsoft Chairman Bill Gates held up HTC's prototype during his speech at a consumer-electronics trade show.

"We were so proud and surprised that Mr. Gates was holding up our device, saying, 'This device comes from a little company called HTC from Taiwan. They made it,' " Chou said. "Some of our engineers were crying."

Since then, the company has become a driving force in the handheld market, sustaining the business over the years by first manufacturing nonwireless organizers, such as the Compaq iPAQ. It also makes newer versions of the Palm Treo and some Hewlett-Packard devices.

Tipping point

The company today is traded on the Taiwan stock exchange and has 4,500 employees worldwide and more than 1,000 engineers in Taiwan.

Although the early partnership with Microsoft was a big win, the tipping point came more recently. HTC couldn't be successful as a wireless-devices manufacturer if there were no networks to support them.

In the past two years, North American carriers have rolled out high-speed data networks called 3G that provide DSL speeds and support Web browsing, e-mail and other data applications. In addition, it wasn't until May last year that Microsoft released a new mobile operating system that improved access to e-mail, allowing it — and HTC — to gain traction in the market.

That's allowing the company to catch up to the pace set in Europe, where 3G networks have been around longer. There, HTC ranks as the second-biggest Smartphone maker after Nokia. Research in Motion (the Canadian maker of the BlackBerry) is No. 3, according to research firm Canalys.

U.S. sales have increased as HTC has focused more on the market here. In the past, it served the U.S. market from Taiwan and used third parties such as Audiovox to resell its devices. Now it has almost 400 people in the U.S. to support sales and even outsources a call center to a company in Kirkland.

Leaning on U.S. unit

Beyond sales, however, HTC will be leaning on the U.S. office to lead the company as it continues to work closely with Microsoft and other local partners.

Scott Horn, director of marketing with the Mobile and Embedded Devices Division at Microsoft, said HTC has the attention of Gates and Chief Executive Steve Ballmer.

"Over the last 18 months, Bill and Steve started meeting with them during our quarterly business reviews, which can go for a day or two," Horn said. "The reason they got interested is because we would always bring in HTC devices to show them."

Across town at T-Mobile USA's headquarters in Bellevue's Factoria area, you can find Chou sketching new devices on a whiteboard for Cole Brodman, T-Mobile's senior vice president and development chief.

Brodman said he saw early designs of the T-Mobile Dash about a year ago. Unlike most HTC designs, the device didn't have a pull-out keyboard, but it was just what T-Mobile was looking for.

Brodman encouraged HTC to make it a priority.

The device came out last month to some early rave reviews.

Brodman said HTC brings T-Mobile into the loop much earlier in development than others do. "It's a collaborative product partner; they are a company that embraces things we want to," he said.

Sights on next big thing

The relationship with Brodman started early on, Chou said. He remembers showing Brodman HTC's first wireless device. In retrospect, that product wasn't very good, and it was expensive, had poor battery life and was limited to a black-and-white screen.

Brodman declined to carry it. Still, HTC went on to sell 50,000 of the devices in Europe.

"We've literally been a very lucky company because it wasn't a very good product at all," Chou said.

Now that Chou's vision of putting wireless into palm-sized devices has become commonplace, HTC has its sights set on the next big thing — filling in the market between phones and laptops.

The idea is risky, said Todd Kort, an analyst at Gartner. "In two to three years from now, it might be a good business, but it's an idea before its time," he said.

But one could argue HTC was nine years before its time in 1997.

Achilles said the company is entering an exciting time.

"We are the only ones taking the high-end phone and going even more upstream from that," he said. "For everyone else, it is the midtier handset market where they have the huge volume. But this is all we do."

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com