Google buys HTC

Google has announced that it has bought HTC Corporation for $1.1 billion.

Background

Alphabet declared that it made $3.5 billion in net income and saw sales of $26 billion in the second quarter of 2017. The profit would have been larger had it not been for the fine levied on the company by the European Union this year. The year-on-year profits also fell by almost 30%.

However, the company has grown significantly in the second quarter. The revenue is up by 21% as compared to the same period in 2016. Much of Google’s revenue comes from two advertising programs called AdWords and AdSense (Google’s annual revenue stands at $90 billion). Both programs have been under EC’s scanner since 2010.

In 2011, Google bought Motorola Mobility for around $12.5 billion. In 2014, it sold the assets left of Motorola Mobility to Lenovo Group. This deal was worth $2.9 billion.

HTC Corporation is a Taiwanese consumer electronics company founded in 1997. It designs and manufactures electronic devices such as mobile phones and tablets. HTC and Google have collaborated on products for nearly a decade.

Analysis

Google has announced that it will pay $1.1 billion to buy HTC Corporation. HTC has been struggling with sales of its units in the recent years. Since 2011, the company has netted heavy losses and its stock prices have come down by at least 90%.

Google will now have ownership over HTC’s smartphone hardware and expertise. One of the key products that Google will now acquire is Pixel smartphones. Pixel was manufactured to be a competitor for the iPhone series. Rick Osterloh, senior Vice President of hardware at Google stated, “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.”

According to Osterloh Google is looking to build its core capabilities in this sector. In his blog he wrote, “It's still early days for Google's hardware business. We're focused on building our core capabilities, while creating a portfolio of products."

HTC has stated that the latest development will not hurt its smart phone sales. The company’s Chairwoman and CEO Cher Wang said in a statement, “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.”

Assessment

Our assessment is that Google is looking to boost its hardware development with the acquisition of HTC. The hardware section of the company has seen some setbacks in past including Google Glass and this would be a step towards finding sector in that field.