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Google Spends $1.1 Billion on Parts of HTC’s Smartphone Division

Google just took a major step towards becoming real phone maker: The company struck a deal with Taiwan-based HTC to acquire parts of the latter’s smartphone division, and license HTC’s patents on a non-exclusive basis. Both companies announced the agreement late Wednesday, or early morning local time for HTC.

Under the agreement, a number of HTC employees, including engineers and designers, are going to move to Google. A lot of these staffers previously collaborated with Google on building the company’s Pixel original Pixel phones, as well as the Pixel 2 that Google is expected to unveil early next month.

“HTC has been a longtime partner and has created some of the most beautiful, high-end devices on the market,” said Google’s hardware chief Rick Osterloh in a blog post. “We can’t wait to welcome members of the HTC team to join us on this journey.”

Reports of talks between the two companies had surfaced in recent weeks, and HTC had announced earlier Wednesday that it would halt trades of its shares in anticipation of a major announcement.

This isn’t the first foray into the phone business for Google. The company acquired Motorola for $12.5 billion in early 2014, only to sell it again in pieces over time. But the strategy behind the HTC acquisition seems to be a different one. Google ran Motorola as an independent business at arms length, producing phones under the Motorola brand.

This time around, Google clearly isn’t looking to run a separate hardware company. Instead, the talent from HTC is going to be used to develop future Google-branded phones and other hardware — a strategy that is closer to Apple’s phone business.

HTC, meanwhile, seems intent on keeping its own phone business alive — at least for now.

“This agreement is a brilliant next step in our longstanding partnership, enabling Google to supercharge their hardware business while ensuring continued innovation within our HTC smartphone and VIVE virtual reality businesses,” said HTC chairwoman and CEO Cher Wang in a press statement. “We believe HTC is well positioned to maintain our rich legacy of innovation and realize the potential of a new generation of connected products and services.”

HTC at one point sold about one in ten smart phones around the world. This year, the company’s market share is estimated to be below 1%. The company’s real growth business has been virtual reality, including its HTC Vive headset as well as its Viveport VR content store.

 

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