google_htc

Google is Buying HTC’s Research and Development Team for $1.1 Billion

google_htc

HTC has finally announced that its “Powered by HTC” research and development division will be bought out by Google for $1.1 billion.  Powered by HTC is the team behind Google’s Pixel and Pixel XL smartphones.  According to HTC’s CO, Peter Shen, this will mean about half of their team will be joining Google.  But they also emphasized that HTC will continue to develop its own range of smartphone, including its next flagship product.  The agreement also grants Google a non-exclusive license for a large part of HTC’s intellectual property.  The deal isn’t quite finalized, it is expected to be approved and closed by early 2018.

What exactly does this all mean? HTC co-founder and CEO Cher Wang made the following statement:

“This agreement is a brilliant next step in our longstanding partnership, enabling Google to supercharge their hardware business while ensuring continued innovation within our HTC smartphone and Vive virtual reality businesses,”

But the rumor mill suggests that there is something more to this. Perhaps the fact that HTC has been in trouble.  The company hasn’t been performing well since 2015.  They have been weak on several fronts and have been undercut on the lower end by low-margin Chinese business that can compete on quality.  At the higher end, HTC doesn’t have the advertising ability to go up against Samsung or LG.  HTC’s business have also been at risk of not being able to cover its own losses.  If a company like Sony or LG lose millions on phones, they simply shift cash from profitable divisions, like Playstation or TVs to cover the loss.  HTC doesn’t have that kind of insurance plan because its core business is the manufacture and sale of smartphones.

Which means that this is definitely a good deal for HTC.  Don’t get me wrong.  This isn’t a merger or a buy out by any stretch.  At least not in full.  Google is simply taking half of it’s R&D division.  What will everyone else do?  The remaining R&D team will focus on HTC’s own smartphone brand as well as VR technology.  Which means they still have a dog in this fight.  But I wonder, why? I mean, you’re giving Google access to a big chunk of your R&D division, and you’re also giving them access to your IP.  But what does this do for you HTC?

It seems it is giving them a fighting chance.  HTC is actually a really good company, but they can’t compete with their wealthier rivals.  Google picked HTC to manufacture their Pixel for a reason.  Google is a pretty choosy company who wouldn’t select just anyone to be it’s partner.

Google spent around $12.5 billion to buy Motoroloa back in 2011.  Which makes the HTC purchase look like chump change.  All of that being said, it’s still unclear as to why Google is doing this.  Yes, I’ve mentioned a few reasons, but I think there’s more to the story than we’re being told, or hearing.  Google isn’t that altruistic that it would just buy a portion of the company.  But they do have a really good product, so maybe Google sees something there, that I don’t.