Google Acquires HTC’s Pixel Division For $1.1 Billion

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Google has confirmed that it is acquiring HTC’s Pixel division for $1.1 billion. The Taiwan smartphone manufacturer has long been working closely with Google to develop its Pixel phones.

In a blog post, Rick Osterloh, Google’s hardware boss said, “These future fellow Googlers are amazing folks we’ve already been working with closely on the Pixel smartphone line, and we’re excited to see what we can do together as one team.”

The deal includes a non-exclusive license of HTC’s intellectual property.

HTC was a top smartphone maker once, but its market share sank to less than 1% last year, compared to 9% in 2011, according to Counterpoint’s data.

“So this investment, while is a business decision to have access to one of the best R&D team [sic] but also I believe is a sort of emotional decision to save its close partners,” said Neil Shah, research director at Counterpoint Technology Market Research.

HTC CEO Cher Wang stated that the agreement will ensure ongoing innovation within HTC smartphones and the Vive virtual reality business. In fact, a press note from the company hints that it is already working on its next smartphone.

Google will get about 2,000 HTC employees (about one-fifth of HTC’s total workforce) in the all-cash deal. The two firms also agreed to look into other areas of collaboration in the future.

Google has always been interested in offering its Android operating system to device makers. These OEMs also preferred Android so that users have access to email, maps, YouTube videos and so on. However, Google deviated from what it has been doing for all these years and gave its name to the Pixel smartphone, showing its commitment to hardware.

Google hired former Motorola executive Rick Osterloh as the head of its hardware division last year. The search giant also forayed into Internet-connected devices more recently with Google Home, its answer to Amazon’s Echo.

Now, acquiring HTC’s Pixel division marks another effort from Google to push its nascent and growing hardware capacity. Launched just a year ago, Pixel smartphones account for less than a 1% market share with shipments of 2.8 million units, according to research firm IDC. Big names like Samsung and Huawei depend on Google for its Android mobile operating system. With Google expanding its own range of smart devices, it could slow down the supply to these OEMs.

It would not be wrong to say that Google’s purchase of HTC’s Pixel division can take any direction, but analysts believe it is going to be more successful than the Motorola deal. Google acquired Motorola Mobility for $12.5 billion five years ago. However, it later sold the division to Lenovo Group for just $3 billion. Nest Lab, which Google acquired in 2014 for $3 billion, has yet to become profitable.

“To have a tighter integration of hardware and software and build [its] own branded products, Google needs access to a good R&D team,” said Shah.

On Wednesday, Alphabet shares closed up 1.14% at $947.54. Year to date, the stock is up almost 20%, while in the last year, it is up almost 19%. HTC halted trading of its shares on Thursday. From its peak in 2011, the stock has dropped 94%.

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