Big news for the smartphone industry as Taiwanese manufacturer HTC released a statement suspending trade of its stock pending further notice. This startling new development has further fueled rumours that the company might be in the final stages of a buyout by Google’s parent company Alphabet.
Rumors of an impending buyout of HTC’s smartphone division are once again doing the rounds due to this recent announcement. The buying and selling of a stock are typically only halted to prevent widespread panic among shareholders due to a major upheaval. This would suggest the buyout rumours may very well be real. However, contrary to many other reports in the past, it would seem that it is HTC’s smartphone division that would be sold to Google, not their Virtual Reality headset division.
A deal between the two companies appears to be very likely on paper. HTC and Google have had a very close relationship over the past few years. HTC has made a maximum number of smartphones for Google till date. It was two Nexus devices and two Pixel devices HTC has made for Google.
Besides for Nexus One and Nexus 9, HTC was contracted by Google to manufacture the highly successful Google Pixel and Pixel XL smartphones. There are also several reports claiming that HTC will have a major part to play in the manufacturing of the second generation of Pixel devices as well.
Google and Pixel are also collaborating on several other fronts, including the potentially highly lucrative VR and VR headset industry. However, does the deal make sense for both companies?
However, does the deal make sense for both companies? Is Google making the similar mistake like it did in the past by acquiring and then selling off Motorola?
Google Buying HTC: A Repeat Mistake or Calculated Move?
Analysts believe Google is making a very well calculative move. From Alphabet’s perspective, the deal is more of a mixed bag. With Google expanding their hardware footprint with the Pixel lineup of smartphones, acquiring a manufacturer does make a degree of sense. It would allow Google greater control over the design and manufacturing process, and help them complete with Apple on a similar level.
However, this deal is also very reminiscent of Google’s acquisition of Motorola in 2012. The deal was somewhat of a disaster, with Google selling a company they acquired for $12.5 billion for a mere $2.9 billion just a couple of years later. In the last two years, however, the market has matured and premium smartphones are making heads move.
This deal seems the best option for HTC at this point of time. HTC was one of the original pioneers of the smartphone and Android, but have fallen on hard times recently. With a market share of 9%, HTC was one of the top 5 smartphone manufacturers in 2012. However, now its share has fallen below even 1%, with the company suffering losses over the past few quarters. In fact, HTC registered a net loss of $72.47 million in Q2 2017. To put HTC’s downfall into perspective, the company’s shares have fallen by 94% since April 2011.