Google and HTC Announce $1.1 Billion Cooperation Deal

Long-time partners Google and HTC have announced a new agreement between the two companies which will see a proportion of HTC’s smartphone team cross over to Google. That was one of the options that we reported on three weeks ago (No Comment from HTC on Rumours of a Spin-Off)

Google will pay $1.1 billion as part of the deal, which is expected to conclude in early 2018 and will also see the company gain a non-exclusive license for the use of HTC IPs. Google will not receive a stake in HTC as part of the agreement.

Google and HTC have developed premium smartphones together for ten years. Indeed, many of HTC’s employees have been already working with Google in the development of its Pixel smartphone. The Google Pixel 2, manufactured by HTC is due to be released next month.

The Google Pixel, made by HTC, was released in October 2016.

HTC will continue to develop its own range of smartphones, following the release of the HTC U11 earlier this year. The company is also making strides in the VR market with its HTC Vive headset—which is reportedly outselling competitor Oculus Rift at a ratio of two-to-one—as well as in the AR and AI industries, and the IoT.

Cher Wang, chairwoman and CEO of HTC, said:

“As a pioneer of the smartphone market, we are very proud of our history of innovation. Our unmatched smartphone value chain, including our IP portfolio, and world-class talent and system integration capabilities, have supported Google in bolstering the Android market.

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. 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”.

Analyst Comment

This is an interesting move. Clearly, there are obvious benefits for both sides – Google gets some engineers and patents, which might help it push its Pixel line onwards, although as HTC helped develop the Pixel, it seems unlikely that there will be a revolution in terms of technology or features for Google. Google pointed out that it worked with HTC to make the first Android smartphone, the HTC Dream. HTC gets some cash that will buy it some time in moving its business to the next phase – whatever that is.

A few weeks ago, it looked as though HTC might sell off its VR business on the back of the success of the Vive, but this deal suggests that it sees more future in that business than it does in smartphones.

Of course, Google already has a number of hardware interests and previously bought Motorola’s smartphone business before selling it off again to Lenovo at less than a quarter of what it cost a couple of years earlier (although it kept the patent portfolio). Google also has Nest.

It seems likely to me that this was partly a defensive move. HTC has clearly been in trouble for some time, but is developing the Pixel 2 and, effectively, Google has bought the development team for that device, as that number of engineers is reckoned to be around half of HTC’s R&D staff. The move avoids anybody else acquiring that expertise, which should be very good in terms of how to integrate Android with the latest hardware. (BR)