Why it makes sense for Google to buy HTC’s phone division
Here’s a rumor that will blow your mind: Google is apparently “in the final stage of negotiations” to acquire HTC’s smartphone division.
The rumor comes from the Chinese-language site Commercial Times and suggests that Google will acquire only the mobile arm of HTC, not the entire company. The financial news outlet based in Taiwan doesn’t specify how much the deal would be worth.
The possible acquisition — although shocking — makes quite a lot of sense when you consider all that’s happened in the in past few years. Google is desperate to challenge Apple’s dominance in the mobile industry with its own premium phone built from scratch.
Although Google’s first official branded phone, the Pixel, was reviewed positively, it never quite reached the same level of success as the iPhone. Acquiring a mobile phone company would put Google in a better position to experiment with hardware and essentially control the entire experience of using one of its branded phones. (HTC manufactured Google’s first Pixel phone and is expected to do the same for the Pixel 2).
It wouldn’t be the first time that Google decided to buy a phone company, either. Back in 2012, Google purchased Motorola Mobility for about $12.5 billion. The predominant view at the time was that Google would use Motorola to create better versions of its Nexus devices, which were essentially reference Android phones for developers and hardcore fans.
But the deal went south fast. Google never actually merged the Android and Motorola teams, which largely operated in two different states across the U.S. Motorola continued making Android phones, such as the Moto X Pure, but there was never anything special to set its phones apart from other rivals like Samsung, LG, and HTC. That phone also wasn’t specifically branded as a Google product, unlike the Pixel.
The entire thing became a disaster for Google. Only two years after the deal was finalized, the search giant sold Motorola to Lenovo for $2.9 billion. It was a colossal waste of money and made the company even more dependent on partnering with Android phone makers like Samsung and LG to combat Apple’s dominance in the mobile phone market.
If the HTC acquisition actually goes through, things could be quite different from Google’s Motorola acquisition. The most obvious change is that Google is already producing its own branded phones this time and desperately needs something to set its phones apart from competitors.
The next generation of its branded phone — unofficially dubbed the Pixel 2 — is expected to launch in October. Google is apparently relying on HTC to actually manufacture the Pixel 2, which has only fueled rumors that it could outright buy HTC’s mobile division. The Pixel 2 XL is rumored to be manufactured by LG.
The search giant also once depended on HTC to make the Nexus One, its reference phone for Android developers, back in 2009. Two years later, the companies partnered together again to make the Nexus 9 tablet, another reference for developers.
If the rumored deal goes through, it would mean that Google finally owns the full stack (i.e. the software, hardware, and manufacturing) of an Android phone. This could actually put the company in a better position to challenge the iPhone and create a more controlled experience for consumers with less glitches — something Android users have long complained about.
Whether it’s Google or not, someone is likely to buy HTC’s smartphone division. In late August, Bloomberg reported that HTC was holding talks with companies including Google to potentially buy its virtual reality division or possibly even the entire company. HTC’s stock price has also been in a free-fall since 2011 and the company itself has struggled to gain market share in the phone industry.
On paper, it looks like a win-win for both companies. Now we just need to know how much it’s actually going to cost Google.