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Google Pays $1.1 Billion For HTC's Pixel Division, Bets Anew On Smartphones

Google Pays $1.1 Billion For HTC's Pixel Division, Bets Anew On Smartphones
In what is Alphabet Inc’s Google’s second major foray into phone hardware after an earlier costly failure, the company said that it would pay $1.1 billion for the division at Taiwan’s HTC Corp that develops the U.S. firm’s Pixel smartphones.
Roughly equivalent to one fifth of the Taiwanese firm’s total workforce, the all-cash deal will see Google gain 2,000 HTC employees. the two firms agreed to look at other areas of collaboration in the future and the deal will also acquire a non-exclusive license for HTC’s intellectual property.
At a time when consumer and media attention is largely focused on rival Apple Inc., a ramping up of its ambitions for Android smartphones is underscored by the transaction even though Google is not acquiring any manufacturing assets.
“Google has found it necessary to have its own hardware team to help bring innovations to Android devices, making them competitive versus the iPhone series,” said Mia Huang, analyst at research firm TrendForce.
To run its hardware division last year, Google hired Rick Osterloh, a former Motorola executive, and the move is part of a broader and still nascent push into hardware. And expected to include two Pixel phones and a Chromebook, a new product launches is on Oct. 4 and the deal also comes ahead of that launch.
According to research firm IDC, with an estimated 2.8 million shipments, Pixel smartphones, only launched a year ago, have less than 1 percent market share globally.
Google had earlier purchased Motorola Mobility for $12.5 billion in 2012. It sold it off to China’s Lenovo Group Ltd for less than $3 billion two years later and the company will be aiming not to repeat mistakes then made. The reasons for selling it off was compared too iPhones, Motorola failed to produce appealing products.
This time around, the risks are minimized by the lack of manufacturing facilities and the much lower deal price tag.
According to IDC, Android has become the dominant mobile operating system with some 89 percent of the global market, following Google’s strategy of licensing Android for free and profiting from embedded services such as search and maps.
But the inconsistent experience that has been produced by the emergence of many variations of Android, has long been frustrated the company. Analysts said that its relationship with Android licensees would likely get complicated by pushing its own hardware.
But given HTC’s long decline, some analysts also questioned the wisdom of the deal. The Taiwanese firm has seen market share dwindle sharply in the face of competition from Apple, Samsung Electronics Co and Chinese rivals even as it once sold one in 10 smartphones globally.
“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 because of declining revenues,” said Ryan Reith, an analyst at 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.”

Christopher J. Mitchell

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