Opinion: Google HTC Deal More About Android Harmony Than Disruption

September 21, 2017 - Written By John Anon

So Google has purchased HTC. Well not really but that is what many had been expecting to happen with speculation on the topic running riot just a matter of days, even hours, ago. Instead, the announcement that did come through seemed tame by comparison. One which did not have the venom many had been expecting, and one which was very light on the details that it was confirming. It had been assumed that if Google announced it was buying HTC’s mobile division this could be a disruptive move, but instead we now find ourselves looking at what is likely more about harmony within the Android ranks than one which could be considered a play-making move.

So what did Google buy?

This is still fairly vague. What is clear from the announcement is that Google has purchased people-power in addition to rights to some of HTC’s intellectual property (IP). Neither of which was disclosed in any meaningful manner. So if you read some articles on this you will hear as much as 50-percent of the HTC workforce is now moving over to Google while others will state a figure much lower and closer to 20-percent. Although whichever number is closest to the real number is irrelevant, as it is still a significant number of people moving from one company to another, so much in fact that the term exodus clearly springs to mind. But even with such a migration of workers – it is still not quite the same as Google buying HTC and acquiring 100-percent of the workforce.

As for the IP rights, this is likely to be something that is never fully disclosed. More to the point, while the mystery surrounds what HTC IP Google now owns, the truth is that it owns none. Not only has Google only licensed the rights to use certain IP from HTC, but it did so in a non-exclusive fashion. Which presumably means HTC is still free to license the same IP to anyone else, or of course, continue using it itself.

Was it worth $1.1 Billion?

This is a very good question and likely one which will divide opinions. On the one side you do have those who will see this as proof that Google is backing up its rhetoric on producing its own hardware as up until now most of what has come from Google has been little more than words. As in spite of the company marketed its recent hardware offerings as ‘made by Google’ nothing could be further from the truth and certainly not when you define made as actually manufacturing. So while this will be evidence to some that Google is now starting to make moves to back up its smartphone ambitions, once again this is something that is not quite true. Yes, Google has now effectively purchased a smartphone-making team and not just any collection of players but the very ones who had been working on the Pixel line up to now. So Google now not only has a smartphone-making team, but it has an experienced Pixel-making team and can license some of the technology it needs/wants to include in Pixel phones indefinitely. However, that is largely the extent to the purchase and something that is in stark contrast to the purchase of Motorola.

With Motorola Google purchased the lot and with HTC Google has essentially purchased nothing, and certainly nothing of meaning such as manufacturing operations or facilities. Some will argue that this is good for Google and that it highlights Google has learned from the mistakes it made when purchasing Motorola. Which while arguable, is presuming that Google did not do what it set out to do when it purchased Motorola. Back then things were very different and Google did not buy a smartphone maker to make smartphones, compared to now when it has not bought a smartphone maker to make smartphones. Likewise when it offloaded Motorola to Lenovo it did so while keeping much of the patent technology that it originally wanted when it acquired Motorola in the first place. In contrast to the current ‘deal’ Google has not only not bought the company (or at least the mobile side of the company) but has also not bought the patent technology. On the face of it, Google has not bought anything for that $1.1 billion. At least nothing tangible.

Google and HTC – the original Android BFFs

The last point is one that needs to be addressed further as usually when one buys from another it is more of a clinical procedure. Yes, companies who are in the process of being bought typically announce how good it is for their company and that they are happy to be working with the buyer, while the buyer normally announces it plans to keep the business as it is, jobs are safe, and nothing will change. But behind the scenes, purchases can be a death sentence to a company and quite often to the job security of those working for the company. Something which very well may have been the case if Google had indeed outright purchased HTC’s mobile division. But it didn’t. So while some will still doubt the future of HTC’s mobile division, and those in charge of it, and even draw on this as further evidence of the end of HTC in mobile, on this occasion it does seem as though Google is actually trying to help the company by not buying them.

First off, HTC made it clear that it does intend to continue making smartphones and very clearly stated that a successor to the HTC U11 is still in development and on the way. After all, Google only bought those who were focused on the Pixel line of smartphones which presumably means HTC still has a wide pool of talent to draw on (by media estimations as much as 80-percent of its previous workforce, or as little as 50-percent) to develop its own phones. More so, it is arguable that with the cutback in staff, HTC is in an even better position than ever to once again succeed in mobile. Whether you buy the 20-percent or 50-percent staff figures touted by the media, this is still the equivalent to HTC culling its staff with massive layoffs – of course, without any of the actual negative press associated with a culling, the redundancy packages, the uproar, and everything else that comes with downsizing.

Furthermore, while HTC may have gotten the credence for being the ‘Pixel maker’ was it actually a worthwhile endeavor for the company? Credence doesn’t equate to revenue (which is something HTC has reportedly and routinely been noted as needing), and it does not automatically equate to respect either. So if anything, being the Pixel maker was more than likely a loss-making exercise for what had been considered a loss-making division of a loss-making company. Certainly in terms of resources – and especially when we are assuming 20 to 50-percent of the workforce were dedicated to the making of Pixel products. So not only has Google provided HTC with a way to significantly streamline its workforce-related costs, but it has also removed what was likely to be a massively resource-draining entity – Pixel. All of this while also throwing in a cool $1.1 billion in cash. So from this deal HTC reduces its overheads significantly, offloads its Pixel responsibilities, gains a massive cash injection, and all in return for non-exclusive access to some of its IP. Likely a very good deal for HTC and one that is not normally seen when one company is looking to buy another.

Which brings us to the BFF remark. As part of the announcement this week HTC and Google were both keen to point out how long the two companies have been working together. Google’s Rick Osterloh summed it up nicely during Google’s announcement by stating “we’ve achieved several mobile-industry firsts, including the first ever Android smartphone, the HTC Dream, also known as the T-Mobile G1 (I loved mine!); as well as the Nexus One in 2010, the Nexus 9 tablet in 2014, and the first Pixel smartphone just last year.” So regardless of actual sales or market position, HTC is one of the most Android-focused partners Google has. It has been there through the lifespan of Android, and Google and HTC have repeatedly teamed up to advance the cause of both. As Osterloh noted, not only did HTC and Google come together to bring to market the first ever Android smartphone, but also the first ever ‘made by Google’ Pixel phone. So if two companies were likely to be friends, these two are likely to be the best example of such a friendship, and like any good friendship when one is in trouble the other comes to help. Which on the face of it, is exactly what Google has now done. It has helped its oldest Android friend to stay in the game for at least another batting.

The Android Family

Which brings us to another point that shouldn’t be overlooked, the Android family in general. Much of the media coverage on this is already looking and deciding from a distance. Most notably from the wider ‘Android and iOS’ perspective with the suggestion being made that this is Google’s way of competing against Apple and in particular competing against Android’s fragmented nature. Which although could be the case, it does seem to be an odd way of going about the fragmented issue – by keeping another OEM in the game and not buying up manufacturing channels with a view to uniforming Android hardware development. What this is more likely an example of, is Google bolstering its smartphone ambitions and network, while also not stepping on the toes of its other partners – the wider Android OEM family. If Google had swooped in, bought up all that is HTC mobile and tomorrow started churning out Pixel 2 phones by the millions with a view to ensuring that a significant number of devices are the same (and thereby reducing the fragmentation), then arguably Samsung, LG, et al, would have been up in arms. Google would have immediately and instantly created a vacuum where Android would be at threat, as it would become far more dependent on Pixel being a success while also ensuring the likes of Samsung and LG begin to see the Pixel as a direct and within-competitor, as well as a further reason to bolster their own software ecosystems – without Android.

Takeaway

Which arguably is the biggest takeaway from this week’s news as it could be said that Google’s light touch with this deal highlights how sensitive Google views its own position in the smartphone market. As Google is likely in the very precarious position of trying to assert itself as a real and serious smartphone brand without its partners becoming concerned, affronted, or confrontational on the matter. A balance which is unlikely to be easy to maintain in the long term and one which likely means Google needs to be seen to be making moves, while also strategically having those moves viewed by its close allies as baby steps. The long term goal likely being that Google will become a dominant smartphone player, but in the meantime must do so with a slowly, slowly approach. One thing that does seem evident from this latest move is that Google is sending out a very loud and very clear message to its senior partners – that irrespective of Pixel, Google is here for you.