Google agreed to buy part of HTC Corp.’s engineering and design teams for $1.1 billion to bolster the U.S. internet giant’s nascent hardware business.
Alphabet Inc.’s Google is taking on HTC employees including teams that’ve worked on its signature Pixel smartphone. The deal also comes with a non-exclusive licensing agreement for HTC intellectual property, the companies said in a statement.
Google gains tighter control over production of its Pixel smartphone and other devices, potentially helping sales. Those gadgets are becoming the pillars of Google’s strategic push to distribute critical software products like its voice-enabled assistant and better compete with Apple Inc. The search giant is preparing to unveil a second generation of devices in October, building on a portfolio that runs the gamut from its Google Home speakers to Daydream.
It’s unclear what the departure of key engineering talent spells for the future of HTC, which once ranked among the world’s top smartphone makers but lost share to Apple, Samsung Electronics Co. and Chinese manufacturers like Huawei Technologies Co. It’s since waded into virtual reality with the Vive headset. HTC had been working with an adviser to explore selling its handset or VIVE virtual reality businesses, and Google had been talking with the company, Bloomberg reported last month.
Alphabet investors may be concerned about history repeating itself. In 2012, Google paid $12.5 billion for Motorola Mobility, then a leading Android handset manufacturer. In less than three years, Google sold it to Lenovo Group Ltd. for less than $3 billion, while keeping Motorola’s valuable patent portfolio. Owning Motorola had eroded Google’s profit margins and upset other phone makers that relied on its Android software.
The HTC transaction however costs a lot less and comes at a very different time — when Google and its biggest rivals are more focused than ever on consumer devices built around new artificial-intelligence and augmented-reality services.
By Baishakhi Dutta
