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HTC and Google form $1.1 billion smartphone partnership

Google has paid US$1.1 billion to Taiwanese smartphone maker HTC to acquire technology and an unspecified number of staff.

The two companies say the agreement is a testament to the decade-long strategic relationship between HTC and Google around the development of premium smartphones.

It also supports HTC’s continuing branded smartphone strategy, enabling a more streamlined product portfolio, greater operational efficiency and financial flexibility.

Despite recognised product quality, HTC has been struggling to make progress in the crowded global handset market. The Google deal will boost its cash reserves and cement the long-standing partnership as Google tries to boost its strength in what some commentators describe as a “fragmented” Android operating system market.  

An unspecified number of HTC employees – many of whom are already working with Google to develop Pixel smartphones – will join Google’s payroll.

But HTC moved to reassure the market that the company will continue to have “best-in-class engineering talent” currently working on the next flagship phone, following the successful launch of the HTC U11 earlier this year.

“HTC will also continue to build the virtual reality ecosystem to grow its Vive business, while investing in other next-generation technologies, including the Internet of Things, augmented reality and artificial intelligence,” the company said.

Google, meanwhile, said the deal “further reinforces our 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. Additionally, this agreement also represents a significant investment by Google in Taiwan as a key innovation and technology hub.”

Google will have non-exclusive use rights to HTC’s smartphone IP, the two companies said.

Deal reflects “Apple threat”

Commenting on the HTC and Google partnership, John Baptista, an associate professor of information systems with Warwick Business School, and a digital media specialist, said the deal shows Google’s confidence that its has the ideas internally to refine its technology and bridge the divide between IoT, smartphones and other technologies.

“Despite its larger user base, Google’s future in the smartphone market is being threatened by Apple’s superior ability to integrate hardware and software centred on user experience.

“The fragmented user experience of Android phones and the increasingly mute voice of Google in this market demands them to raise their stakes and engage more with manufacturers of devices to show more ambition and offer a credible vision for the future,” said Baptista.

“Google knows it needs to work more tightly with manufacturers to develop a more consistent experience between the phone and other devices such as wearables, home automation, car automation, as well as increasingly work related applications and integration with office systems.”

Baptista says executing its vision in partnership with HTC will help Google set a reference for other manufacturers that use their platform and explain to its users how and why they should continue to engage with Google’s products.

“Also, augmented reality and virtual reality look increasingly to be the future for mobile, so it might be that Google needs to work more tightly with chip manufacturers to develop the hardware in conjunction with their software to deliver AR and VR capabilities.”

“Brilliant step” says CEO

Cher Wang, chairwoman and CEO of HTC, described the deal with Google as “a brilliant next step” in the company’s longstanding partnership, enabling Google to “supercharge their hardware business” while ensuring continued innovation within HTC’s smartphone and Vive virtual reality businesses.

“We believe HTC is well positioned to maintain our rich legacy of innovation and realise the potential of a new generation of connected products and services.”

The transaction, still subject to regulatory approvals and customary closing conditions, is expected to be settled by early 2018.

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