Google closes $1.1B HTC deal, setting up collision course with Apple's iPhone

AppleInsider · January 30, 2018 4:45PM

Google has officially cemented its $1.1 billion deal for HTC's engineering and design teams, putting the company in a position to more directly challenge Apple in the smartphone market.

"You have to be vertical in some cases to really push the envelope for consumers," Google hardware leader Rick Osterloh explained to Bloomberg. "Our intention is to invest in this for the long term. You'll see a steady increase in investment from us."

The executive noted that Google wants more control of design and production, including deeper cooperation with suppliers. That would mirror Apple's approach -- while the iPhone initially relied heavily on off-the-shelf parts, Apple has exerted increasing micromanagement, making unique demands from suppliers and designing its own A-series processors.

Historically Google has focused on software, developing the Android platform as a way of spreading its advertising and services while letting third-party vendors handle the actual electronics. Even Google-branded Nexus devices were designed largely by other companies. The situation has changed, though, with its recent Pixel and Pixel 2 phones.

HTC's assets could let Google design its own processors, which might reduce Apple's years-long advantage in tightly integrating hardware and software. This is often credited with boosting the performance and efficiency of iPhones despite their sometimes having weaker specifications on paper.

About 1.5 million Pixel phones were sold in 2017, just a fraction of iPhone numbers. Google may be poised to grow marketshare however if it can offer a clear advantage to first-party Android phones over ones from partners like Samsung.

electricchairrepairman · January 30, 2018 5:05PM

Might be more appropriate to compare this to the road traveled by Microsoft.

spamsandwich · January 30, 2018 5:08PM

This really puts Google on a collision course with Samsung, not Apple.

dick applebaum · January 30, 2018 5:08PM

For some reason, this popped into my head:

"Mother, may I go out to swim? Yes, my darling daughter. Hang your clothes on a hickory limb But don't go near the water."

slurpy · January 30, 2018 5:13PM

The only "collision course" here is with the other Android OEMs. Someone is much more likely to debate between an HTC and a Samsung, than between an HTC and an iPhone. Same with Pixel phones.

zimmie · January 30, 2018 5:15PM

Uh ... is this somehow different from their acquisition of Motorola Mobility for $12.5 billion? They later sold it to Lenovo for $2.9 billion, taking a $9.6 billion loss.

spamsandwich · January 30, 2018 5:19PM

dick applebaum said:

For some reason, this popped into my head:
"Mother, may I go out to swim? Yes, my darling daughter. Hang your clothes on a hickory limb But don't go near the water."

That’s an amusing poem. One I’ve never heard of before.

epicurus · January 30, 2018 5:19PM

they should be on a collision course with Samsung, i mean Samsung has been forking Googles Android more and more to build their own OS Tizen if i remember correctly, they all sell android devices if Google is getting into the hardware side then their attack should be Samsung in my opinion

dick applebaum · January 30, 2018 5:20PM

electricchairrepairman said:

Might be more appropriate to compare this to the road traveled by Microsoft.

What am I missing... A company that offers a well regarded, but low selling smart phone -- buys the engineering and design teams from the company that is struggling to stay in the smart phone business???

bigmushroom · January 30, 2018 5:25PM

zimmie said:

Uh ... is this somehow different from their acquisition of Motorola Mobility for $12.5 billion? They later sold it to Lenovo for $2.9 billion, taking a $9.6 billion loss.

Not quite.

- They sold Motorola to Lenovo for 2.9 billion (as you correctly report).
- They also sold the cable modem and set-top box business to Arris for 2.35 billion in 2012.
- Motorola had 3 billion in cash.

So once you factor everything out (plus some tax assets apparently), it appears they lost not more than 3.5 billion on the deal. A nice article is here:

http://bgr.com/2014/02/13/google-motorola-sale-interview-lenovo/

In return, they kept most of Motorola's patents in the end and defused a looming patent war between Motorola and other Android licensees.

So one view is that they paid about 3.5 billion for Motorola patents - which is less than Apple and Microsoft paid when they teamed up to buy Nortel patents for 4.5 billion.

But more importantly, Motorola was about to sue other Android manufacturers (Samsung, HTC). Google appeared to buy Motorola to end that threat because Android was not yet the dominant alternative to iOS. If Motorola would have sued everyone else, it could have disrupted the whole eco-system.

So I don't think Google regrets buying Motorola - it might have been a defensive move (getting more patents, prevent a patent war with other Android OEMs) but it wasn't hugely expensive in the end.

22july2013 · January 30, 2018 5:26PM

SpamSandwich said:

dick applebaum said:

For some reason, this popped into my head:
"Mother, may I go out to swim? Yes, my darling daughter. Hang your clothes on a hickory limb But don't go near the water."

That’s an amusing poem. One I’ve never heard of before.

I read every word of that post and didn't notice the rhymes at all until you mentioned it. Does that make me stupid?

gatorguy · January 30, 2018 5:27PM

SpamSandwich said:

This really puts Google on a collision course with Samsung, not Apple.

Not really on a collision course with anyone. They supposedly sold 1M Pixels year one (2016) and last year jumped all the way to.... 1.5M Pixels. Ok. Big threat.

dick applebaum · January 30, 2018 5:27PM

This, also, popped into my mind:

"It's the apps, stupid!"

applesauce007 · January 30, 2018 5:30PM

HTC is licensing a lot of iPhone features for Apple for its phones.
Google will lose again.

gatorguy · January 30, 2018 5:32PM

zimmie said:

Uh ... is this somehow different from their acquisition of Motorola Mobility for $12.5 billion? They later sold it to Lenovo for $2.9 billion, taking a $9.6 billion loss.

Hardly, and that applies to both the comparison and claim of losses from the Moto buy.

Google didn't buy HTC but only the engineering assets, and they didn't lose $9.6B in buying and then selling Motorola which included IP, product, plant and equipment.

dick applebaum · January 30, 2018 5:35PM

SpamSandwich said:

dick applebaum said:

For some reason, this popped into my head:
"Mother, may I go out to swim? Yes, my darling daughter. Hang your clothes on a hickory limb But don't go near the water."

That’s an amusing poem. One I’ve never heard of before.

Here's a longer version:

A sweet little peach from Manhattan Beach
Was strolling upon the sand,
And met a young sport from jolly Newport
Who thought she was perfectly grand
She murmured to him, "I'd go take a swim,
But I am engaged to be wed,
Though it's very warm, it's very bad form."
"Yours looks good to me," he said
She answered right away, "To Ma I used to say"

cho: Mother may I go out to swim,
     Yes my darling daughter,
     Hang your clothes on a hickory limb,
     But don't go near the water.
     You may look cute in your bathing suit,
     But act just as you oughter,
     Now and then you can flirt with the men,
     But don't go near the water.

This dapper young swell then said to the belle,
"Please come out and dine with me,
It's quite impolite, but come out tonight,
I love you and you must agree,"
She answered in haste, "It's very bad taste
To dine with a stranger I'm told:"
But her taste was fine for champagne and wine
Cost him twenty dollars cold,
And afterwards he thought, Of what her mother taught

...somebody's gettin' had!

tmay · January 30, 2018 5:37PM

bigmushroom said:

zimmie said:

Uh ... is this somehow different from their acquisition of Motorola Mobility for $12.5 billion? They later sold it to Lenovo for $2.9 billion, taking a $9.6 billion loss.

Not quite.

- They sold Motorola to Lenovo for 2.9 billion (as you correctly report).
- They also sold the cable modem and set-top box business to Arris for 2.35 billion in 2012.
- Motorola had 3 billion in cash.

So once you factor everything out (plus some tax assets apparently), it appears they lost not more than 3.5 billion on the deal. A nice article is here:

http://bgr.com/2014/02/13/google-motorola-sale-interview-lenovo/

In return, they kept most of Motorola's patents in the end and defused a looming patent war between Motorola and other Android licensees.

So one view is that they paid about 3.5 billion for Motorola patents - which is less than Apple and Microsoft paid when they teamed up to buy Nortel patents for 4.5 billion.

But more importantly, Motorola was about to sue other Android manufacturers (Samsung, HTC). Google appeared to buy Motorola to end that threat because Android was not yet the dominant alternative to iOS. If Motorola would have sued everyone else, it could have disrupted the whole eco-system.

So I don't think Google regrets buying Motorola - it might have been a defensive move (getting more patents, prevent a patent war with other Android OEMs) but it wasn't hugely expensive in the end.

Opportunity cost was substantial from that failure; at least a loss of four to five years of development and production.

foggyhill · January 30, 2018 5:43PM

I see a collision course with Samsung and anti-trust authorities in the EU, but, hey, whatever huh.

foggyhill · January 30, 2018 5:44PM

bigmushroom said:

zimmie said:

Uh ... is this somehow different from their acquisition of Motorola Mobility for $12.5 billion? They later sold it to Lenovo for $2.9 billion, taking a $9.6 billion loss.

Not quite.

- They sold Motorola to Lenovo for 2.9 billion (as you correctly report).
- They also sold the cable modem and set-top box business to Arris for 2.35 billion in 2012.
- Motorola had 3 billion in cash.

So once you factor everything out (plus some tax assets apparently), it appears they lost not more than 3.5 billion on the deal. A nice article is here:

http://bgr.com/2014/02/13/google-motorola-sale-interview-lenovo/

In return, they kept most of Motorola's patents in the end and defused a looming patent war between Motorola and other Android licensees.

So one view is that they paid about 3.5 billion for Motorola patents - which is less than Apple and Microsoft paid when they teamed up to buy Nortel patents for 4.5 billion.

But more importantly, Motorola was about to sue other Android manufacturers (Samsung, HTC). Google appeared to buy Motorola to end that threat because Android was not yet the dominant alternative to iOS. If Motorola would have sued everyone else, it could have disrupted the whole eco-system.

So I don't think Google regrets buying Motorola - it might have been a defensive move (getting more patents, prevent a patent war with other Android OEMs) but it wasn't hugely expensive in the end.

Right... Come on. Seriously. Give the actual worth of those patent instead of just peddling a spin.

ericthehalfbee · January 30, 2018 5:47PM

Collision course with Apple? What would that look like?

https://youtu.be/iauVCdLGGhU

osmartormenajr · January 30, 2018 5:49PM

Talk all you want about the IP Google retained from the Motorola deal. It was the biggest cash barbecue I’ve ever seen! Unless Google has any new idea (which I doubt), the HTC deal will follow on the same footsteps. The only thing Google learned is to be more parsimonious with the money it makes! (Although, it wouldn’t be a bad thing to have another player keeping Apple on its toes!)

All in all, I wouldn’t want to be in Samsung shoes. They have a serious threat ahead, and a spotty track record of late.

Google closes $1.1B HTC deal, setting up collision course with Apple's iPhone

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