The rumor mill was working overtime over the last few weeks as everyone speculated what a Google acquisition of HTC would look like. Would it be a Motorola situation? Maybe more like Microsoft acquiring Nokia? In the end, it's nothing so extreme as an acquisition. Google and HTC have come to an agreement wherein Google essentially carves out the Pixel business from HTC, leaving the rest to continue making smartphones.
Google is paying HTC $1.1 billion in the deal, which involves the transfer of an unspecified number of employees from HTC to Google (under hardware boss Rick Osterloh). The companies confirm these are mostly employees who have been working on the Pixel phones with Google already. In addition to the Pixel team, Google is getting a non-exclusive license for HTC intellectual property to use in the hardware designed at Google.
With the Pixel team gone, HTC says this deal reinforces its commitment to its own branded smartphones. The company's engineers are continuing work on HTC's next flagship smartphone, but now there's $1.1 billion in cash laying around to keep the lights on. The Vive virtual reality business will also probably see a boost from the infusion of Google money.
However, this new lease on life won't automatically solve all of HTC's problems. If HTC is going to keep making phones, it needs to make more compelling ones. That might be harder without all the engineering talent it just gave up. If things don't improve, HTC is just going to be in the same position in a couple of years, and Google might not be interested in tossing it another lifeline.
Google and HTC expect to have the deal finalized by early 2018, pending the usual regulatory approvals.
Google and HTC Announce US$1.1 Billion Cooperation Agreement
Certain HTC Employees – Many of Whom Worked on Pixel Smartphones – to Join Google Google Receives HTC IP through Non-Exclusive Licensing Agreement
Transaction Reinforces HTC’s Commitment to Innovation and Its Branded Smartphone Business
MOUNTAIN VIEW, Calif. and TAIPEI, Taiwan – September 21, 2017 – Google (NASDAQ: GOOG, GOOGL) and HTC Corporation (TWSE: 2489) today announced a definitive agreement under which certain HTC employees – many of whom are already working with Google to develop Pixel smartphones – will join Google. HTC will receive US$1.1 billion in cash from Google as part of the transaction. Separately, Google will receive a non-exclusive license for HTC intellectual property (IP).
The agreement is a testament to the decade-long strategic relationship between HTC and Google around the development of premium smartphones.
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 next- generation 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.
“As a pioneer of the smartphone market, we are very proud of our history of innovation. Our unmatched smartphone value chain, including our IP portfolio, and world-class talent and system integration capabilities, have supported Google in bolstering the Android market,” said Cher Wang, Chairwoman and CEO of HTC. “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. 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 has been a longtime partner of Google and has created some of the most beautiful, premium devices on the market,” said Rick Osterloh, Senior Vice President of Hardware at Google. “We're excited and can't wait to welcome members of the HTC team who will be joining Google to fuel further innovation and future product development in consumer hardware.”
The transaction, which is subject to regulatory approvals and customary closing conditions, is expected to close by early 2018.
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.