Google to spend $1.1B to acquire part of HTC's mobile team

The deal includes HTC employees who had been developing Pixel phones.

Google will pay HTC $1.1 billion in cash for part of HTC’s mobile personnel as the internet search giant steps up its hardware ambitions.

The companies didn’t say how many HTC employees will move to Google under terms of the deal, but said many of them are already working to develop Pixel phones. In a separate agreement, Google will receive a nonexclusive license for some HTC intellectual property.

The move comes less than 24 hours after HTC said shares would halt trading Thursday in advance of what had been described as a “major takeover” regarding the future of its smartphone business. That announcement restoked speculation that emerged several weeks ago that Google was in talks to acquire HTC’s entire mobile division.

The move appears to be about much more than just smartphones, however, Senior Vice President of Hardware Rick Osterloh wrote in a Google blog post.

“Last fall, we introduced our first family of Made by Google products, including Pixel smartphones, Google Home, Google Wifi, Daydream View and Chromecast Ultra, and we’re preparing to unveil our second generation of products on October 4,” wrote Osterloh, a former Motorola chief who signed on with Google in April 2016. “We’re excited about the 2017 lineup, but even more inspired by what’s in store over the next five, 10, even 20 years. Creating beautiful products that people rely on every single day is a journey, and we are investing for the long run.

“That’s why we’ve signed an agreement with HTC, a leader in consumer electronics, that will fuel even more product innovation in the years ahead,” Osterloh continued. “With this agreement, a team of HTC talent will join Google as part of the hardware future.”

HTC built the first Android-based phone, the G1, nearly 10 years ago, and it built on that momentum in the early years of Google’s platform as it expanded into software and services. But the company has seen its worldwide market share wane in recent years as Samsung and Apple dominated the high end of the market, while several Chinese vendors have gained ground in the budget market with less expensive handsets.

The move marks Google’s intentions to further expand in a hardware market that it has struggled to leverage. Google sold its Motorola Mobile division to China’s Lenovo for $2.91 billion in early 2014, less than three years after it paid $12.4 billion for the company. (Google did retain the “vast majority” of patents it picked up in the deal, however.)

But the investment may also be necessary as Google hones its focus on wireless platforms and services, according to Geoff Blaber, vice president of research for the Americas at CCS Insight. And it gives HTC a chance to pursue a virtual reality market that is still in its early days.

“Google gets key personnel and it deepens the relationship but the bigger winner seems to be HTC. It’s a much-needed investment as HTC struggles to right the ship and steer a new course in VR,” Blaber told FierceWireless via email. “Google is not a hardware company and nor does it want to become one, but hardware is an increasingly important conduit for its services. As computing, AI and search become pervasive, Google needs to ensure that it can deliver its services as seamlessly and broadly as possible. That requires deeper involvement in hardware."