Here is why Google should buy HTC

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© NextPit

It’s no secret that HTC is struggling, financially speaking. It’s also no longer a secret that Google and HTC have been working together to manufacture phones since at least 3 years (unless perhaps this agreement has been broken?). To benefit everyone, perhaps Google should simply buy HTC.

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This scenario is, of course, hypothetical but I didn’t just make it up. There have been many rumors that Google may possibly purchase the Taiwanese firm but, of course, nothing has been confirmed by either party. If you think about it, this could benefit both sides as, on one hand, it would recover HTC’s finances and, on the other hand, Google would also profit from it.

Why would Google be interested in buying HTC?

Make no mistake, Google would not spend a colossal sum of money just to save HTC and its employees, there must be specific reasons. As previously explained, Google is waging a war of independence so that they can produce their own phones (OK, materials will probably be produced in China or India but let’s not get caught up in that). In this regard, Google wants to establish itself as a manufacturer meaning that all other smartphone manufacturers are not (or are no longer?) potential collaboration partners but, rather, competitors.

HTC is a manufacturer along with Huawei, Samsung and many others. For the anecdote, let’s remember that HTC began manufacturing smartphones for other organisations. They were notably celebrated in France for having manufactured Orange’s SPV, one of the smartphone predecessors which, at the time, worked under Microsoft’s operating system. Due to HTC’s status as an independent manufacturer, it is considered a competitor of Google who want to enter into the market. That being said, two things must be taken into consideration:

Let’s recap: HTC can manufacture smartphones and needs money, Google has money and wants to manufacture smartphones. The solution seems logical. Let’s be crazy and imagine that Google and HTC agree on a possible purchase, what would become of the Taiwanese firm?

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Google could save HTC, but only because the company has something to gain.  © NextPit

If we assume that Google wants to produce smartphones then, logically, HTC would become the manufacturing division of the firm (Google would, of course, impose their own standards). Perhaps it could even rejoin Alphabet, the conglomerate of businesses gathered under the American giant’s banner, since HTC won’t participate in Google’s main activities (for example, search engines and various internet activities such as messaging and streaming).

What effects would this have on the competition?

Putting HTC under their banner would allow Google to achieve several objectives. The first, is to dispose of a competitor. HTC won’t succeed and won’t sell their smartphones like hot cakes, but is still present in the market and risks becoming an obstacle. The world today seems to be very black and white: if you’re not with Google, you’re against Google. Friend or foe, in other words. When finances are falling short, it is better to be friends with Google...

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All the manufacturers want a piece of the cake. © NextPit

The purchase would also have a symbolic impact. Google would show their competitors that they don’t just talk about doing things and that they mean business. It’s in their interest to share Android with other manufacturers since the revenues are, of course, linked to the amount of Google users and accounts. However, on the software front, the Google soldier wants to become a General. It’s hard to predict what measures the American giant would take to gain ground on its rivals, but it’s likely that it will just push the larger companies to work towards releasing their own operating system.

Samsung and Huawei want to become independent, i.e. to use their own OS which will allow them to escape from Android and, above all, from Google. However, having different systems risks complicating life for everyone, particularly for developers who have to produce one application for Android, one for iOS, one for Tizen, one for Huawei OS etc.

The hardware war is on the back burner. Smartphones are all alike these days and the only truly revolutionary technology that we could see in the world of phones would be a size shrinking system, for example, a collapsible screen. This technology is already in the development stages elsewhere.

The future is perhaps in connected devices. I don’t mean just “domestic” devices, like the ones that allow you to turn off a light or to turn on the washing machine, but also those that you can link to a smartphone, for example, virtual reality headsets. HTC created the popular “HTC Vive” and, given Google’s interest in VR (You can read our article on DayDream), there is good reason as to why Google would be interested by this type of hardware technology.

Other reasons

As explained previously, by buying HTC, Google will be disposing of a competitor which is, of course, in their interest, that being said HTC is just a drop in the ocean in the mobile phone market. HTC’s seniority in this sector could be useful to Google, particularly for technology. Like all manufacturers, HTC has several patents and a mastery of certain technologies, particularly, in my opinion, of UltraPixel which is so costly for the manufacturer. This technology has been criticized often because it didn’t live up to the user's expectations, but with Google’s help (and resources!), things could really change.

HTC’s seniority in technology could be useful to Google.

Could the geographical position be an asset for Google? Ten years ago, we predicted a promising future for Taiwan (as well as Singapore and others), but that was without taking into account the real Chinese tiger who shows no mercy and does no favors. It is because of this that HTC was forced to bow down to the Asian market because of pressures from the Chinese manufacturers. I have to acknowledge that my knowledge is still limited in regards to the Asian market but I think that Google must already be rather well established in Asia. I don’t think that a presence in Taiwan would help them to be more aggressive in the Chinese market, but perhaps I am wrong.

Would these reasons be enough for Google to buy the Taiwanese giant? Perhaps the astronomical purchase price scared off other buyers, but the American giant has its resources. If they think the investment will pay off, they won’t wait very long.

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  • Ralph R. Oct 5, 2016 Link to comment

    HTC, In my opinion would be a good buy for Google, but I think they should've just kept Motorola instead of just keeping their patents, and selling the rest to a Chinese owned company. By doing that they would've also been able to get rid of a potential competitor, without having to buy a foreign based company.

    • Dennis McCunney Oct 5, 2016 Link to comment

      *What* competitor?

      As mentioned, Google isn't a hardware vendor. Google makes it's money indirectly, through use of various Google services.

      Android is open source and modular, designed to be picked up by vendors and built with the features needed to support their hardware and what their device is intended to do. There is no requirement to get approval or a license from Google to use Android. It's in Google's interest to have Android on as many things as possible, because that expands the usage of the services on which they make money. Google does *not* want to be perceived as competition by all of those other vendors.

      What Google is doing in hardware moves is priming the pump, designing and propagating new devices that will be test beds and demonstrations of what their newest technology is intended to provide. If the test beds are successful, you can assume other vendors will jump on the bandwagon and release similar products. That's ultimately what Google *wants*.

  • remyj Oct 5, 2016 Link to comment

    No need to buy HTC. Google can use HTC to make their phones just as Apple uses Foxconn. Looks to me like they have done just that buy removing the cobranding, dropping Nexus and using a hardware brand, Pixel, that is exclusive to Google just like iPhone is exclusive to Apple.

  • storm Oct 5, 2016 Link to comment

    I think Google has learned from watching Apple after their flash in the pan moments. They've owned Motorola and let the hardware go. Hardware is not the place to be. Software is much more nimble and greater opportunity.

  • Dennis McCunney Oct 5, 2016 Link to comment

    Google buying HTC doesn't really make sense. Yes, it would benefit HTC, and yes, Google has the money.

    But Google is not a hardware manufacturer, and doesn't need to be. If it wants hardware with its own name on the device, it can get it in an OEM deal on a contract basis with a hardware manufacturer. It doesn't need to become one. Consider who actually made the Google branded Nexus tablet.

    The problem faced by HTC and everyone else is that you can't make money on hardware. Hardware is cheap and getting cheaper. Today's hot must-have device becomes tomorrow's commodity available from half a dozen vendors, with commodity pricing and paper thin margins. Look at the PC industry for examples, and consider why IBM sold their line to Lenovo and Dell went private in a leveraged buyout to escape financial market pressure for revenues and profits it *couldn't* produce. The phone and tablet market is recapitulating what happened there. When you sell hardware, you make pennies on the dollar, you need to sell as many dollars worth as possible to make pennies on, and Lowest Cost Producer Wins. If you *aren't* Lowest Cost Producer, and *aren't* selling scads of whatever it is, you aren't long for this world.

    The smartphone market reminds me of the movie business. You're as good as your last hit picture. Haven't had a hit picture in a while? Sorry, but you're belly up. The woes affecting HTC are things that already savaged Nokia, who hadn't had a hit phone in a while and whose market share was concentrated in cheaper, lower end devices where making actual money was even harder. And smartphones are less technology than fashion statements, where "keeping up with the Joneses" is the motivation, and being able to say "My phone is *cooler* than yours!" is the goal for many buyers.

    Google is a completely different kind of business, whose revenues an profits come from very different places. If they tried to become a hardware manufacturer through something like an acquisition of HTC, they'd stumble badly because they wouldn't understand the business. You would get something like Microsoft's acquisition of a chunk of Nokia.

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    Deactivated Account Oct 4, 2016 Link to comment

    Go ahead Google buy HTC, then you can stab them in the back like you did with Motorola!

  • Some Tech Guy Oct 4, 2016 Link to comment

    Google doesn't need to buy HTC. Google had a hardware arm, Motorola. They sold it to Lenovo. It would have been much easier if they wanted to stay in the hardware business to revamp Motorola. Motorola had offices right down the street from Google headquarters. Dumb move IMHO.

    • Dennis McCunney Oct 5, 2016 Link to comment

      From everything I've seen, Google didn't buy Motorola to get the hardware business. The bought them for the patent portfolio. These days, the business revolves around intellectual property, and the competition happens in the courts as much as in the marketplace. Tech outfits have large legal staffs dedicated to determining what patents might cover what they want to do and who holds the rights, and to file for patents if the determination is that there aren't existing patents covering it, and no prior art to invalidate a patent application. Motorola held patents covering a lot of what Google wanted to do, and securing those rights was worth a lot of money to Google. They were perfectly happy to sell the hardware part of the business to Lenovo. That wasn't the part they wanted.

  • Kunal Narang Oct 4, 2016 Link to comment

    Yes, Google should buy HTC and put them out of their misery.

  • Wakfu Oct 4, 2016 Link to comment

    Htc sell his phones expensive. Money is money.

  • ljhaye Oct 4, 2016 Link to comment

    Motorola 2.0? Every time I hear this argument I simply ask why didn't they just keep motorola and go to war with their OEM's (Samsung) ? They aren't buying anyone any time soon. Android is not a lucrative platform for the OEM's (minus Samsung) as they all lose money and are abandoning Google's other Android initiatives i.e. Android Wear .

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