Under the all-cash agreement, Google is buying a non-exclusive license for HTC’s intellectual property with additional agreements to look at other areas of collaboration in the future. 2,000 HTC employees will be joining Google, which is roughly one fifth of HTC’s entire workforce.
This is a fairly risk-free move by the Redmond, Calif.-based tech giant, as Google won’t be receiving any manufacturing assets – a stark contrast to the company’s $12.5 billion dollar purchase of Motorola Mobility in 2012.
“What is in Google’s favour this time is that it is buying just a part of HTC, and it is a part that can help deliver smartphones with a premium, elegant industrial design while also providing much tighter integration between hardware, the Android OS, and Google’s services,” said analyst David McQueen, research director at ABI Research in a statement to ITBusiness. “Although shipments in the Pixel range are currently less than 2 million a year, this tie up will undoubtedly be a good thing for Google. It will help it grow scale in the high-end while turning it into a major competitive threat to the other Android OEMs rather than just as a point of reference.”
Google’s full-scale acquisition of Motorola didn’t go as planned, a move the company had hoped would aid Google in its battle against the iPhone. Google sold off its Motorola purchase just two years later for less than one fourth of the price to Lenovo for almost $3 billion.
“HTC doesn’t have the unwieldy scale and baggage that came with Motorola, and there is no sign of any manufacturing facilities swapping hands under the terms of the deal. While HTC doesn’t have a particularly large or important patent portfolio, this is not part of the deal although Google has secured authorisation for those that make most sense to the partnership,” said McQueen.
Google’s HTC agreement comes just a couple weeks before it will be announcing its next line of products on Oct. 4. It is expected to be launching two Pixel phones – the Pixel 2 – as well as a Chromebook. This is also a year after Google hired former Motorola exec Rick Osterloh to run its hardware division.
While HTC has given a signficant portion of its smartphone talent to Google, the company said in a press release that it is currently working on its next flagship smartphone device, which will follow the HTC U11 launch from earlier this year. It will also remain focused on its virtual reality ecosystem that is centered around the HTC VIVE. The company also plans to invest in technologies such as the Internet of Things, augmented reality, and artificial intelligence.
“Such a deal also makes sense for HTC as the company has been struggling to make a commercial impact in the smartphone market for some time despite being one of the most aggressive OEMs in adopting technology innovation. However, it will be a continuing struggle for HTC’s remaining smartphone business to remain competitive in the market, and the company could be squeezed even further if it also hives off its Vive VR business,” said McQueen.
According to IDC, HTC’s worldwide smartphone market share declined to just 0.9 per cent last year. That is a long ways away from the 8.8 per cent peak it held in 2011. According to the same report the Google Pixel holds less than one per cent as well, but that is expected as it just entered the market a little under a year ago.