Why the One X holdup hurts HTC

The stakes for HTC were already incredibly high, but unfortunately, now it's a nail-biter. Thanks to a ridiculous patent fight Apple started, the HTC One X on AT&T and HTC EVO 4G LTE on Sprint are now delayed indefinitely, as U.S. Customs officials verify that HTC complied with an order to remove infringing code from the phones. This dates back to a ruling in December from the International Trade Commission (ITC), which stated HTC violated a "data tapping" patent Apple held by including code that lets you tap on a phone number in an email to bring up the dialer. No Supply Equals Less Demand There's a chance this could get resolved in a matter of days. But that's unlikely, and even if it does, the damage to HTC's bottom line could be irreversible. Think about what goes into a major product launch. It's not just about the product itself, with all the attendant part sourcing, manufacturing, packaging, and distribution. There are also the marketing campaigns, the PR wave, the trade show introductions, the news coverage surrounding the announcements, and then reviews just before launch time from publications like ours. All of that conspires to build awareness with consumers, which juices those ever-important initial sales numbers Wall Street loves so much. HTC is on the eve of its biggest smartphone revamp in years. Early buzz for these phones is impressive—including from PCMag. We awarded the HTC One X our Editors' Choice for AT&T. After a short period of availability, here we are recommending a smartphone that suddenly no one can buy. Every day that passes for HTC is a day where thousands of consumers can now look closely at other options they may settle for or even prefer instead. Many of these people had already been waiting for months until their two-year contracts ran out. One of the biggest fallacies out there is that vendors hold back supply of a new product in order to generate buzz. The idea is that if a product is out of stock, it must be a hot seller, and that makes people who didn't know much about it suddenly desire it more. That almost never actually happens in real life. Unless you're Ferrari—whose spokesperson has said publicly that it builds "exactly one less than the market requires" for each model—holding back product hurts revenue way more than any perceived scarcity helps that product's image. It's Even Worse Than It Looks The patent situation itself is ridiculous. The ITC's import ban began April 19, 2012. At the time, HTC said it would remove the data-tapping feature altogether, but then backtracked and introduced a workaround that bypassed the patent infringement while leaving the function in place. That's the part U.S. Customs is stuck on—and the way the law works, they can take as much time as they need to verify the code has been removed. That threatens the entire edifice HTC has built up around this launch. In addition, this also comes as part of the first Ice Cream Sandwich phones to hit the market since the launch of the Samsung Galaxy Nexus almost five months ago. All new Android phones that appeared in the intervening time are still running Android 2.3 (Gingerbread), an almost two-year-old OS. The One X and EVO 4G LTE are key devices in this regard; while some older phones like the HTC Vivid and HTC Amaze 4G have since received ICS updates, the HTC One line is the first across-the-board set of new devices we've seen in a long while. Oddly enough, the HTC One S on T-Mobile—also an Editors' Choice—is unaffected for now. As I'm writing this, it's in stock online at T-Mobile (unlike the One X on AT&T, which is out of stock). Earlier today, patent blogger Florian Mueller speculated that the One X and EVO 4G LTE are singled out because they are probably "the first HTC devices to be launched in the U.S. after the import ban took effect." It's been clear for years now that the way our patent system works is completely broken. Something like a link to dial a phone number should be an obvious feature—in fact, phones have now had that for years—so this latest kerfuffle is especially ridiculous. Whatever happens, here's hoping the situation with U.S. Customs is resolved quickly. We can say with confidence that these phones are worth the wait. But HTC can ill afford the delay.