TAIPEI: Alphabet Inc's Google said it would pay US$1.1bil in cash to
acquire the division at Taiwan's HTC Corp that develops the US firm's Pixel
smartphones, its latest push into hardware manufacturing.
Google has sought to beef up its hardware capability with deals and
product launches, and last year hired Rick Osterloh, a former Motorola
executive, to run its hardware division.
"For Google, this agreement further reinforces its commitment to
smartphones and overall investment in its emerging hardware business," the
search giant said in a statement.
Under the deal, Google will also receive a non-exclusive license for
HTC's intellectual property. The Taiwanese firm will continue to run its
remaining smartphone business.
But the Taiwanese firm, which once sold one in 10 smartphones globally,
has seen its market share dwindle sharply due to competition from Apple Inc,
Samsung Electronics Co and Chinese rivals.
Its sharp decline had some analysts questioning the wisdom of the deal.
"HTC is past its prime in terms of being a leading hardware design
house, mainly because of how much it has had to scale back over the years as
because of declining revenues," said Ryan Reith, an analyst at research
firm IDC.
"Unless Google really wants to control hardware for its other
businesses like Home and Chromebooks in addition to smartphones, then I don’t
see this as being a bet that pays off."
The deal marks Google's second major foray into smartphone
manufacturing. It purchased Motorola Mobility for US$12.5bil in
2012 and sold it off to China's Lenovo Group Ltd for less than US$3bil two years later.
"It’s still early days for Google’s hardware business,"
Osterloh said in a blog post, adding it is focused on bringing together the
best of Google software and hardware for a suite of its core products.
Other hardware initiatives include its acquisition of thermostats maker
Nest for US$3.2bil in 2014, while product launches include
voice-controlled speaker Google Home and virtual-reality device Daydream View.
Google's strategy of licensing Android for free and profiting from
embedded services such as search and maps has made Android the dominant mobile
operating system with some 89% of the global market, according to IDC.
But it has long been frustrated by the emergence of many variations of
Android and the inconsistent experience that has produced. Pushing its own
hardware will likely complicate its relationship with Android licensees,
analysts said.
HTC shares were on a trading halt on Thursday. The stock has suffered
steep declines over the past couple of years. It has fallen 12% so far this
year and the company is worth around US$1.9bil .
HTC's worldwide smartphone market share declined to 0.9% last year from
a peak of 8.8% in 2011, according to IDC. Google's Pixel had less than 1%
market share since it was launched a year ago, with an estimated 2.8 million
shipments, IDC estimates.
The transaction, which is subject to regulatory approvals, is expected
to close by early 2018.
Evercore served as financial adviser to HTC and Lazard served as
financial advisor to Google. — Reuters
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