In a major development, Google agreed to buy part of HTC Corp.’s engineering and design teams for $1.1 billion to strengthen it’s nascent hardware business.
Alphabet Inc.’s Google is taking on some 2,000 employees with experience working on its signature Pixel devices, intended to showcase the best features of the Android software that now power the vast majority of the world’s smartphones.
The deal also comes with a non-exclusive licensing agreement for HTC intellectual property.
By owning a manufacturer, Google gains tighter control over production of its Pixel smartphone and other devices, potentially helping sales.
Those gadgets are becoming the pillars of Google’s strategic push to distribute critical software products, such as its voice-enabled assistant, contain costs in its main advertising business and better compete with Apple Inc.In 2012, Google had paid $12.5 billion for Motorola Mobility, then a leading Android handset manufacturer. In less than three years, Google sold it to Lenovo Group Ltd. for less than $3 billion, while keeping Motorola’s valuable patent portfolio.
Owning Motorola had eroded the search giant’s profit margins and upset other phone makers that relied on Android, Google software that it supplies to handset manufacturers to promote its services.
The HTC transaction however costs a lot less and comes at a very different time — when Google and its biggest rivals are more focused than ever on consumer devices built around new artificial-intelligence and augmented-reality services.
With each Pixel phone it moves, Google doles out less in traffic acquisition costs: it pays money to partners like Apple and carriers to install Google’s search service. That cost has risen steadily, pulling down its sales totals last quarter in particular.