Google and longtime partner HTC today announced a definitive agreement in which Google will acquire certain employees from HTC’s mobile division team — many of whom have worked on the Google Pixel smartphone line. Google will pay HTC $1.1B in cash as part of the transaction.
The transaction is expected to close by early 2018.
A Pursuit of Hardware
Long-Term Investment: With the hardware market becoming more profitable, Google has made clear its plans to invest heavily in manufacturing its own hardware; this deal represents the fourth major hardware-related transaction for Google. The agreement to acquire certain HTC employees means the company would gain talent, supply chain, and research and development without having to start from scratch in-house. With the acquisition of talent, rather than resources or facilities, Google is steering away from the strategy it employed six years ago with its costly $12.B purchase of Motorola (Google later sold Motorola to Lenovo for $2.9B). Taking cues from vertical integration pro Apple, which outsources work to companies like Foxconn, Google is trying to take a few steps forward with the hopes of competing with hardware kings.
Increased Flexibility: The partnership between the two companies goes a long way back; both have been partners for ten years, with HTC being the major supplier for Google’s Pixel line that debuted about a year ago. After peaking in 2010, HTC’s sales have faced financial challenges. The boost in cash from Google would allow HTC to resolve its challenges while still being able to operate as an independent company. While Google will receive a non-exclusive license for HTC intellectual property, HTC will still continue to produce its own phones and will employ ~2,000 research and design staffers — down from ~4,000.
Dark Horse: With the deal, Google could gain a tighter hold on its Android operating system. While the company is not known for its hardware, if it can manage to produce top-tier hardware in-house, the premium smartphone market could look different down the line; competitors Samsung and Apple could find themselves a new rival to battle.
For more information about this development, click here to read the press release.
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