Google Puts A Ring On HTC

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What's going on?

HTC announced on Thursday that Google had agreed to buy a big chunk of its operations in a deal worth over $1 billion and, for Google, its all about controlling its own smartphones

What does this mean?

Google and HTC have been courting each other for years: Googles Android operating system was first launched in 2008 on an HTC phone, and last year Google partnered with HTC to manufacture the first Google-designed smartphone (the Pixel). In fact, many of the 2,000 HTC employees moving to Google as part of the deal already work on the Pixel so the deal is cementing existing ties between the two companies as well as strengthening Googles own hardware capabilities (thus reducing its reliance on outside manufacturers).

Why should I care?

For the stocks: Google gets in on smartphone hardware while HTC gets out.


Google makes the majority of its revenues from advertising, and these are becoming increasingly dependent on people using Google search (and other services) on their smartphones. So Google is vulnerable to Android smartphone manufacturers launching their own software and services. Also, Google usually pays a cut of its revenues to hardware manufacturers. In manufacturing its own phones, Google addresses both of these issues. Meanwhile, the deal gives HTC a chance to exit a large part of its struggling smartphone business and focus more on its growing virtual reality business.

The bigger picture: The transition may be difficult, but it should help solidify Googles future.


Google tried buying a hardware business once before with its purchase of Motorolas mobile phone unit, but it ended up selling the business a few years later at a big loss. Despite this, Google clearly thinks that developing its own devices is important for its future success. Among other things, the deal better positions Google to develop its artificial intelligence, virtual reality and other offerings as having control over hardware gives it the ability to better integrate software and capture even more data than it already does.

Originally posted as part of the Finimize daily email.

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