Google Announces a Major Move into Hardware with a $1.1 Billion Dollar Deal with HTC prior to their October Event
Patently Apple posted a report last week that announced Google's next event was scheduled for October 4th. Yesterday we posted a report about HomePod naysayers where we presented a graphic of new Google Home mini speakers that might be introduced during the October event. Yet the biggest surprise prior to the event is Google's just announced deal with HTC for $1.1 Billion in cash. It's a move that is clearly indicating that Google is going into hardware, and specifically smartphones, in a serious way going forward. Google wants to take control of future Pixel smartphone designs and features to take on Apple at a deeper level while entering into new areas of hardware like their Google Home smart speakers and far beyond.
Google and HTC have announced a definitive agreement under which certain HTC employees - many of whom are already working with Google to develop Pixel smartphones - will join Google.
More specifically, HTC's Chief Financial Officer Peter Shen said about 2,000 engineers will be transferred to Google. The staff will be "primarily focused on research and development."
HTC will receive US$1.1 billion in cash from Google as part of the transaction. Separately, Google will receive a non-exclusive license for HTC intellectual property (IP).
The agreement is a testament to the decade-long strategic relationship between HTC and Google around the development of premium smartphones, according to the companies.
This agreement also supports HTC's continued branded smartphone strategy, enabling a more streamlined product portfolio, greater operational efficiency and financial flexibility, they said. HTC will continue to have engineering talent work on its next flagship phone, following the launch of the HTC U11. HTC will also continue to build the virtual reality (VR) ecosystem to grow its Vive business, while investing in other next-generation technologies, including the Internet of Things (IoT), augmented reality (AR) and artificial intelligence (AI).
Google said the agreement further reinforces its commitment to smartphones and overall investment in its emerging hardware business. In addition to the talented and experienced team of professionals, Google will continue to have access to HTC's IP to support the Pixel smartphone family.
Cher Wang, chairwoman and CEO of HTC stated that "As a pioneer of the smartphone market, we are very proud of our history of innovation. 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."
Rick Osterloh, senior vice president of Hardware at Google stated that "HTC has been a longtime partner of Google and has created some of the most beautiful, premium devices on the market. We're excited and can't wait to welcome members of the HTC team who will be joining Google to fuel further innovation and future product development in consumer hardware."
Osterloh added that "We think this is a very important step for Google in our hardware efforts. We've been focusing on building our core capabilities. But with this agreement, we're taking a very large leap forward."
The transaction, which is subject to regulatory approvals and customary closing conditions, is expected to close by early 2018.
Analysts are saying that one risk with this deal is that expanding further into smartphone hardware threatens to further alienate Android-based device makers like Samsung Electronics, which has been forging closer ties with Google's rival Facebook, and China's Huawei.
Analysts also predicted Samsung could be the biggest loser as Pixel phones undercut the South Korean tech giant's market-leading smartphone business as consumers potentially turned off by high priced Galaxy devices defect to the Pixel, which is slightly cheaper and has Google's newest software.
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