Cooperation agreement between Google & HTC for $1.1 BillionSeptember 21, 2017
For months, we have been hearing about rumours about Google buying out HTC company. In a press conference today at HTC’s headquarters in Xindian, New Taipei City, the company said it remains committed to its own products, including smartphones and Vive, and will continue developing them even after 2,000 HTC employees—nearly a fifth of its current staff—move to Google as part of the deal.
Google said it would pay $1.1 billion for the division at Taiwan’s HTC Corp that develops the U.S. firm’s Pixel smartphones – its second major foray into phone hardware after an earlier costly failure. (Google had bought Motorola and earned a loss, then sold it Lenovo)
The cooperation agreement is a testament to the decade-long strategic relationship between HTC and Google around the development of premium smartphones.
What is the Cooperation Agreement between Google and HTC?
- Certain HTC employees – many of whom are already working with Google to develop Pixel smartphones – to join Google.
- HTC will receive US$1.1 billion in cash.
- Separately, Google will receive a non-exclusive license for HTC intellectual property.
- HTC will continue to have best-in-class engineering talent, which is working on next flagship phone.
- Represents a substantial investment in Taiwan as a key innovation and technology hub.
So will happen with this agreement?
- Supports HTC’s branded smartphone business, enabling a more streamlined portfolio.
- Provides greater operational efficiency and financial flexibility.
- Monetizes HTC’s smartphone value chain, including IP portfolio and world-class talent.
- Supports growth of VIVE and investment in other next-generation technologies (IoT, AR, AI)
- Reinforces commitment to smartphones
- Supports overall investment in emerging hardware business.
- Enables continued development of Pixel in collaboration with HTC.
- Creates the best Google experience across software, hardware and services
This agreement also supports HTC’s continued branded smartphone strategy, enabling a more streamlined product portfolio, greater operational efficiency and financial flexibility. HTC will continue to have best-in-class engineering talent, which is currently working on the next flagship phone, following the successful launch of the HTC U11 earlier this year. HTC will also continue to build the virtual reality ecosystem to grow its VIVE business, while investing in other nextgeneration technologies, including the Internet of Things, augmented reality and artificial intelligence.
For Google, this agreement further reinforces its commitment to smartphones and overall investment in its emerging hardware business. In addition to the talented and experienced team of professionals, Google will continue to have access to HTC’s IP to support the Pixel smartphone family. Additionally, this agreement also represents a significant investment by Google in Taiwan as a key innovation and technology hub.
Chief executive officer and chairwoman Cher Wang and chief financial officer Peter Shen represented HTC at the press event, while Rick Osterloh, senior vice president of hardware at Google, and Mario Queiroz, vice president of product management, spoke for the Alphabet subsidiary.
Osterloh added “There are many more areas for cooperation than competition between HTC and Google, on many different surfaces including Android. The agreement may have some market overlap with smartphones, but clearly we operate in different geographies, so there are more opportunities for cooperation than competition.”
He also said that Pixel would not have been possible without HTC. “We’re very excited about what we can do with this agreement over the next five, 10, 20 years,” Osterloh said. “Winning in the long run is why we signed this agreement with HTC.”
Wang said “Google is a world-class company known for respecting human talent and innovation. Our agreement means that powered by HTC, Pixel’s DNA will spread out further into the world, while Taiwan will get more investment.”
The deal, which is expected to close by the beginning of next year pending regulatory approval, stipulates that HTC will receive $1.1 billion in cash from Google. About 2,000 HTC employees, many of whom had been working on the Pixel smartphone, will get offers to join Google. In addition, Google will enter a non-exclusive licensing agreement for HTC intellectual property. The deal will help Google build its new hardware strategy after years of partnering with companies like HTC and Motorola Mobility (which it bought for $12.5 billion in 2011) to develop devices.
Wang said HTC will continue developing its U series of premium smartphones and Vive. Osterloh added that Google did not have any announcements about virtual reality to make today, but it remains something that it may collaborate on with HTC in the future.
“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.
Pixel smartphones, only launched a year ago, have less than 1 percent market share globally with an estimated 2.8 million shipments, according to research firm IDC.
Evercore served as financial advisor to HTC and Gibson Dunn and Tsar & Tsai acted as legal counsel. Lazard served as financial advisor to Google and Cleary Gottlieb and Lee & Li acted as legal counsel.
About HTC :HTC Corporation aims to bring brilliance to life. As a global innovator in smart mobile and virtual reality technology, HTC has produced award-winning products and industry firsts since its inception in 1997, including the critically acclaimed HTC U series line of smartphones and industry-leading HTC VIVE virtual reality system. The pursuit of brilliance is at the heart of everything we do, inspiring best-in-class design and game-changing mobile and virtual reality experiences for consumers around the world. HTC is listed on the Taiwan Stock Exchange (TWSE: 2489). www.HTC.com
About Google: Google’s mission is to organize the world’s information and make it universally accessible and useful. Through products and platforms like Search, Maps, Gmail, Android, Google Play, Chrome and YouTube, Google plays a meaningful role in the daily lives of billions of people and has become one of the most widely-known companies in the world. Google is a subsidiary of Alphabet Inc.