* Google has agreed deal to HTC’s Mobile division for $1.1 billion
* HTC already makes Google’s Pixel smartphones, but this deal will grant the Google a non-exclusive license to HTC’s intellectual property.
* Google will also gain 2000 new employees from HTC through the deal
* Although announced, the deal is expected to be completed by the end of the year if approved by regulators
Google has announced that it is spending $1.1 billion to acquire the Mobile division of HTC.
It was revealed last week, that the Silicon Valley tech giant was working behind the scene to buy the struggling Taiwanese phone makers. The rumour further intensified yesterday when HTC announced it would suspend rading of shares ahead of a ‘major announcement.’
Now Google has confirmed during a news conference that a deal has been agreed to buy the Mobile division of HTC – which already makes Google Pixel phones, including the soon-to-be launched 2017 models.
The all-cash deal will also see Google gain about 2000 new employees – half of HTC’s smartphone development workforce – as well as acquire a non-exclusive license for HTC’s intellectual property with a view for further collaborations in the future.
Although the deal does not transfer HTC’s manufacturing assets to Google as we thought it would, it is a sign that the California-based tech giant are seriously looking to carve out a bigger market share for itself – at a time when consumer and media attention is largely directed towards its major rival, Apple.
Google’s Pixel smartphones only launched last year, have less than 1 percent market share globally with an estimated 2.8 million shipments, according to research from IDC. However, the Google-HTC deal highlights the search giant’s commitment to having a more hands-on contribution to the development of its hardware, rather than relying on other companies to host its hugely popular Android software.
From Google’s perspective, although the deal with HTC is relatively cheaper than the $12.5 billion it paid to buy Motorola Mobility in 2012, the American company will be hoping to avoid a repeat of events that led to selling it off two years later to Chinese tech giants, Lenovo Group Ltd for $2.9 billion when it failed to produce phones that are appealing enough to compete with iPhones.
Analyst have questioned the wisdom of the deal, given HTC’s long decline. Some even noted that Google pushing its own devices is likely to complicate its relationship with Android licensees such as Samsung, LG and Sony.
“HTC is past its prime in terms of being a leading hardware design house, mainly because of how much it has had to scale back over the years because of declining revenues,” said Ryan Reith, an analyst at IDC.
“Unless Google really wants to control hardware for its other businesses like Home and Chromebooks in addition to smartphones, then I don’t see this as being a bet that pays off.”
For HTC, going forward should be relatively easier. The deal will not only bring much needed cash, it will also reduce development costs and allow the Taiwanese company to concentrate more on its Virtual Reality arm of business.
“This will be a sizeable reduction in our R&D expenses. Overall it should be in the ballpark of a 30-40 percent reduction in operating expenses,” HTC Chief Financial Officer Peter Shen told a news conference in Taipei.
If approved by regulators, the deal is expected to be completed by the end of the year.
[Featured photo: REUTERS/ Tyrone Siu]