Google’s huge investment in hardware: $1.1B deal to acquire HTC employees announced

HTC engineers were already working on Google’s Pixel phones, so the deal is a logical extension of an already established relationship, plus HTC now gets a huge cash infusion to continue work on its Vive VR business

The way HTC and Google announced their $1.1 billion deal, you would think that slavery is back. What Google has bought is… well, people. HTC engineers, to be exact.

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HTC engineers already develop the Google Pixel smartphones, so the deal makes a lot of sense. But buying 2,000 HTC employees certainly sounds odd.

The implications of the deal are obvious: Google is making a big hardware play, not only with smartphones, but likely also in other tech devices such as VR (HTC is keeping its Vive VR business).

I think Google is reading the tea leaves correctly. Apple is falling further behind the competition, and despite some of my own objections to Android (the upgrade issue), there is becoming less and less differentiation between iOS and Android to keep many users securely in Apple’s camp.

Google’s big competitor here really isn’t Apple, but Samsung. Which is the way Apple sees it, too. Despite last year’s PR disaster (exploding phones), Samsung’s new Galaxy S8 and Note 8 phones have gotten great reviews. So, to complete in the area of high-end phones, Google will need to have a solid group of engineers dedicated to their products. Turns out that such a group was already being employed.

Here is HTC’s announcement regarding the deal:


MOUNTAIN VIEW, CALIF. AND TAIPEI, TAIWAN — September 21, 2017—Google and HTC Corporation today announced a definitive agreement under which certain HTC employees – many of whom are already working with Google to develop Pixel smartphones – will join Google. 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.

This agreement also supports HTC’s continued branded smartphone strategy, enabling a more streamlined product portfolio, greater operational efficiency and financial flexibility. HTC will continue to have best-in-class engineering talent, which is 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.

For Google, this 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. Additionally, this agreement also represents a significant investment by Google in Taiwan as a key innovation and technology hub.

“As a pioneer of the smartphone market, we are very proud of our history of innovation. Our unmatched smartphone value chain, including our IP portfolio, and world-class talent and system integration capabilities, have supported Google in bolstering the Android market,” said Cher Wang, Chairwoman and CEO of HTC. “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.”

“HTC has been a longtime partner of Google and has created some of the most beautiful, premium devices on the market,” said Rick Osterloh, Senior Vice President of Hardware at Google. “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.”

The transaction, which is subject to regulatory approvals and customary closing conditions, is expected to close by early 2018.

Evercore served as financial advisor to HTC and Gibson Dunn and Tsar & Tsai acted as legal counsel. Lazard served as financial advisor to Google and Cleary Gottlieb and Lee & Li acted as legal counsel.

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