Google is biting off a big piece of device manufacturer HTC for $1.1 billion to expand its efforts to build phones, speakers and other gadgets equipped with its arsenal of digital services. It's buying the HTC engineering team that built the Pixel smartphone for Google in a cash deal, the companies said in a joint statement Thursday. Google is also getting a non-exclusive license for Taiwan-based HTC's intellectual property to help support Pixel phones. So, let's see if Google made a smart move there:
What mistakes did HTC do in its past?
Google had focused on giving away its Android operating system to an array of device makers, including HTC, to ensure people would keep using its ubiquitous search engine, email, maps, YouTube video service and other software on smartphones and other pieces of hardware.
But that changed last year when Google stamped its brand on a smartphone and Internet-connected speaker. HTC manufactured the Pixel phones that Google designed last year, paving the way for this deal to unfold.
HTC's chief financial officer, Peter Shen, said about 2,000 engineers will be transferred to Google, Taiwan's Central News Agency reported. The staff are "primarily focused on research and development," Osterloh said.
Although Android powers about four out of every five smartphones and other mobile devices in the world, the software can be altered in ways that result in Google's services being deemphasized or left out completely from the pre-installed set of apps.
That fragmentation threatens to undercut Google's ability to increase the ad sales that bring in most of the revenue to its corporate parent, Alphabet Inc., as people spend more time on smartphones and other devices instead of personal computers.
Downfall of HTC since 2011:
HTC, which teamed up with Google in 2008, has seen its market share shrink dramatically in the last decade in the fiercely competitive smartphone market. Its share of the global smartphone market fell to less than 1% last year, from nearly 9% in 2011, according to Counterpoint data.
One risk, though, is that expanding into hardware threatens to further alienate Android-based device makers such as Samsung Electronics, which has been forging closer ties with Google's rival Facebook, and China's Huawei.
Apple's iPhone and other hardware products are also particularly popular among affluent consumers prized by advertisers, giving Google another incentive to develop its own high-priced phone as a mobile platform for its products and ads.
Google catching up with Amazon's Echo now:
Google also wants to build more Internet-connected devices designed primarily for home usage, such as its voice-controlled speaker that's trying to catch up with Amazon's Echo. The Home speaker includes a digital concierge, called Google Assistant, that answers questions and helps manage people's lives, much like the Alexa in Amazon's Echo.
Some Deals from the Past that shocked everyone:
Google's previous forays into hardware haven't panned out to be big winners so far.
It paid $12.5 billion for smartphone maker Motorola Mobility for $12.5 billion five years ago only to sell it off to Lenovo Group for less than $3 billion after struggling to make a dent in the market.
And in 2014, Google paid more than $3 billion for home device maker Nest Labs, which is still struggling to make money under Alphabet's ownership.
Is it a Gamble for Google for spending $1.1 billion dollars?
The latest purchase is a big gamble for Google Inc. and parent company Alphabet Inc. but analysts say this time it could pay off. That's because it gives a financial lifeline to Google's struggling Taiwanese partner while giving the Silicon Valley giant access to the strong R&D talent it needs in order to expand its share in the coveted premium smartphone market.
Analysts also predicted Samsung could be the biggest loser as Pixel phones undercut the South Korean tech giant's market-leading smartphone business, with consumers potentially turned off by high-priced Galaxy devices defecting to the Pixel, which is slightly cheaper and has Google's newest software.