Google and HTC signed a $1.1 billion all-cash deal. The Mountain View firm acquired a team of engineers from HTC’s smartphone division, but it won’t get any stake in HTC. In addition, Google will gain “non-exclusive” licensing rights to HTC’s intellectual property, both current and future. The team subject of the deal is made by people who already worked with Google to develop Google Pixel smartphones, and they will become “fellow Googlers”.
However, this is an unusual deal and it’s not that easy to understand what really the search giant is looking for. According to Richard Windsor, a former Nomura Securities analyst, “one possibility is that Google is simply pre-paying in order to guarantee capacity and resources such that the previous ramp-up problems that occurred with Pixel do not happen again. This will also provide the infrastructure and distribution to produce Pixel smartphones in high volumes, something with which last year’s product really struggled”.
The Deal Doesn’t Mean The End of HTC
Cher Wang, CEO and Chairwoman at HTC said that Taiwan company will continue to produce its own hardware, like the flagship “U” series of smartphones and the Vive virtual reality ecosystem. The company will invest its money in other next-generation technologies, which means artificial intelligence, augmented reality and IoT. In an email statement, she said:“We believe HTC is well positioned to maintain our rich legacy of innovation and realize the potential of a new generation of connected products and services.”
This is the fourth hardware-related acquisition made by Google. Everything started with Motorola Mobility (now controlled by Lenovo), then continued with Nest and Dropcam. However, the HTC one is different.
What This Means For Google
As anticipated, this is the fourth acquisition for Google, when talking about hardware companies. Google bought Motorola in $12.5 billion, in 2011. Some time later it sold Motorola to Lenovo and, since then, Google relied on third-party manufacturers to work on its Nexus and (later) Pixel devices. HTC, in particular, worked with Google to produce Pixel and Pixel XL.
When talking about Google’s acquisitions, Windsor says that “even with highly hardware-experienced management, these assets have struggled to perform, leaving me with the impression that just being inside Google is enough to put good hardware people off their game. I think that the case with HTC will be a little different as Google is not buying the whole company but instead is paying for some IP and taking on some engineering talent. This is where I am left scratching my head as on my numbers, HTC’s smartphone assets currently have negative value.”
However, this could not be just a smartphone related deal. In fact, according to TrendForce:
“From the long-term perspective, HTC with the money from Google will concentrate on developing its VR business. There is a strong possibility that HTC will also form a closer ties with Google in the development of AR/VR applications.”
While Google, of course, was clearly excited about the deal.
Only the time will tell more about it.
The acquisition will be completed by early 2018, after getting approvement by regulators in the U.S. and Taiwan.