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★ Google and HTC Announce $1.1 Billion Acquihire and Patent Licensing Deal (Sep 21, 2017)

Google and HTC finally announced the deal that’s been rumored for a while and for which many details leaked yesterday. Google is in the end only acquiring 2000 employees and some non-exclusive intellectual property, for $1.1 billion, an amount over half of HTC’s market cap before the deal was announced. The 2000 are around half the research and design team at HTC (and a fifth of the total workforce), while the other half will remain and work on a streamlined portfolio of first-party HTC hardware including a new flagship already in the works. Google’s blog post about the deal is remarkably vague and unhelpful, and it’s equally remarkable that there’s no SEC filing or press release on Alphabet’s investor relations site about the deal given its magnitude. It’s almost as if Google doesn’t want to talk about the deal or its details, but HTC very much wants to, emphasizing both the financial boon – the money to be paid in cash once the deal closes in early 2018 – and its ongoing commitment to making smartphones and VR devices.

The deal has echoes of Microsoft’s bailout acquisition of Nokia a few years back – HTC is a far less important strategic partner to Google, but this very much feels like Google offering a financial lifeline to the very unprofitable and shrinking HTC in return for some assets it needs. Those assets are IP necessary to make Pixel phones without being sued by HTC or anyone else but also the research and design skills necessary to build those phones exactly to Google’s specifications and needs rather than having to work off HTC’s foundation and platform, originally built for other devices. That optimization and the integration with Android it should enable are going to be critical for Google to squeeze the most out of its hardware efforts, though it also needs to go deeper on the chips side, something it’s been reported to be doing separately.

One of the things I’ve been asked about by reporters over the last 24 hours or so is what effect this will have on other Android OEMs. The simple answer is that it clearly strengthens Google’s first party hardware capabilities, which for now aren’t much of a threat. But it’s not as if those OEMs can do anything about it – Android is the only viable open smartphone platform out there today, and if OEMs aren’t producing top-notch, differentiated hardware, Google’s efforts in the space are far from their only problem. One thing is notable: Android engineering head Dave Burke is apparently in Taipei – which is interesting because Google hardware has been said to run at arm’s length from Android team, like any other OEM, so there’s no real reason why Dave Burke would need to be involved in this transaction, and yet there he is in HTC’s home city as this deal is announced.

From HTC’s perspective, the cash infusion will give it breathing room to continue working on a strategy that can again provide sustainable profits in the long run, presumably with its Vive VR business at its core, given that even a shrunken smartphone team isn’t likely to be profitable at its current (or smaller, Pixel-less) scale. I do wonder why Google didn’t just buy the whole company – at under $2 billion market cap, Google could presumably have paid roughly double what it is and had the whole thing, taking what it needed, including manufacturing capability, VR hardware expertise, and other useful pieces, and shut the rest down. This deal is certainly simpler and less painful from an integration perspective, but I’m still not sure I see a viable future for HTC even with this investment and the attendant changes.

via HTC

Google's Hardware Push

Moto X4 Brings Android One to the US and Google’s Project Fi (Sep 20, 2017)

I noted a couple of weeks back with the launch of Xiaomi’s first Android One device that the project appeared to have morphed from a low-tier emerging markets play to one focused more on the mid market, and today’s news reinforces that perception. Motorola is launching its Moto X4 device into the US market as part of the Android One project, and this $400 phone will be available on Google’s own Project Fi service as an alternative to the Nexus and Pixel phones it’s offered until now. (The Nexus phones Google has offered are, by the way, currently showing as out of stock on the Project Fi site, suggesting they’re likely to get phased out with the launch of new Pixel devices in a couple of weeks.) The Android One version isn’t the only one Motorola offers – as I noted when it was announced, the main version actually comes with Alexa baked in, something the Google version certainly won’t do. All of this is indicative of Motorola’s falling leverage with carriers, and its need to do deals with other market players to parcel up its phones in different ways to find attractive niches.

via 9to5Google

★ Google Reportedly About to Announce Partial HTC Acquisition (Sep 20, 2017)

HTC has formally announced that its shares will halt trading for a material announcement tomorrow, and Bloomberg is reporting that it will be that Google is acquiring at least part of the company’s smartphone operations. Other sources – including Taiwanese site Apple Daily and as I understand it shortly also the Wall Street Journal – are saying that it’s the smartphone design operations specifically that Google will acquire, for a relatively small sum in the hundreds of millions of dollars. As I’ve said before, there’s a strong logic to this acquisition despite the history with Motorola. The biggest change since that earlier acquisition is that Google is now far more clearly serious about hardware, with a consolidated division about to announce a second generation of major products at an October 4th launch event. In addition, acquiring a very focused slice of HTC would be a very different proposition from buying what was at the time a much larger and more diverse Motorola business, which was subsequently run largely at arm’s length inside Google. I would expect Google to bring the HTC assets deeply into its own hardware division and to use the new capabilities to drive much more optimized and integrated hardware design relative to the ODM approach used for Pixel hardware, which likely relied heavily on existing designs and platforms from HTC.

All of this is, of course, further validation along with Microsoft’s Surface push of the approach Apple has long taken to tightly integrating hardware and software. It’s increasingly clear that the best results in hardware are achieved by those who can combine hardware and software in such a way, preferably with tight control of the whole process, and Google would get a lot closer to that goal through this acquisition. The big question still remains what happens to whatever’s left of HTC, which presumably will abandon making smartphones and focus on its Vive VR efforts, something that’s going to be a tough proposition in an increasingly competitive market. I’m still surprised that Google isn’t taking over the whole thing, because it could clearly benefit from the Vive assets as it seeks to deepen its own Daydream VR capabilities.

via Bloomberg

★ Nest Introduces First New Hardware Categories in Years, Enters Security Market (Sep 20, 2017)

Nest held a press conference in San Francisco today and introduced three new products including its first really new product categories since its 2014 acquisition of Dropcam (this chart I put together a while ago presents the picture prior to today). The theme of the event was progress towards Nest’s ultimate goal – creating “a home that takes care of the people inside it and the world around it.” That mission combines Apple’s tendency to reinvent familiar products in ways that makes them vastly easier and more pleasant to use (unsurprising given the Nest founders’ Apple heritage) with more of an environmental message, largely tied to the smart thermostats. The first product announced today was a new outdoor version of the Nest Cam IQ indoor camera announced recently which added smarts including facial recognition to reduce false alarms among other things. The second was the Nest Hello, a smart doorbell very much along the lines of others already in the market but again with some clever technology borrowed from the camera line, and is the only product announced today that won’t be available until next year. The third was Nest’s big new category, home security, in the form of the Nest Secure system, which combines a hub and sensors to monitor movement inside a home as well as doors and windows.

The Nest product line now feels a lot more comprehensive than it did a couple of years ago, with smart thermostats, smoke/CO detectors, and indoor cameras for inside the home, outdoor cameras and the doorbell for outside it, and a security system to keep it all secure, plus integrations with various third parties for lighting and other device categories. But it’s very much still an off-the-shelf, DIY, pay-upfront approach to the smart home, which continues to limit the addressable market to people willing to tinker, take risks, and self-manage with their home gear. When new CEO Marwan Fawaz came on board, I had thought he might lead the company through a transformation to more of a services company, which would put it much more in line with the telcos, cable companies, and others already offering that model and thereby reaching a much broader market. But there’s little sign of that yet – the only service component announced today is provided through a partnership with a third party monitoring company, and the prices for the new gear remain high: Nest Cam IQ outdoor is $349 for one, the starter pack for Nest Secure is $499 but only comes with two sensors, with most homes likely requiring several more, with pricing for Hello yet to be announced.

As such, Nest continues to largely target people with higher disposable incomes and a willingness to self-install and self-manage. My Nest thermostats frequently disconnect randomly from the strong WiFi signal in my home and suffer from other glitches, so unless Nest has improved things dramatically in these new products they’re likely to require quite a bit of management. It’s also worth noting that there continues to be minimal integration with the rest of Alphabet – I’d hope that some of the clever detection stuff has leant on Alphabet’s broader AI and machine learning capabilities, and Google Assistant integration is coming to the Nest Cam IQ devices in a software update. But Nest feels like it’s still being run very much at arm’s length from Google, for better or worse.

via Nest

The Smart Home is Stuck

Details on Google’s Home Mini, Pixel 2 XL, and Pixelbook Leak Ahead of Event (Sep 19, 2017)

Droid Life appears to have obtained images and pricing for three of the hardware products Google is expected to unveil at its October 4th hardware event. It has four separate posts on the Pixel 2 and Pixel 2 XL, a Chromebook called the Pixelbook, and the Google Home Mini, which is exactly what it sounds like. The Pixel 2 models seem to lean heavily on the design of the first versions from a hardware design perspective, with some minor changes and some new color options, with the smaller one being made again by HTC and the larger one by LG, as reported earlier. It looks like Google will embrace this year’s super premium pricing for larger flagships, too, with an $849 starting price on the XL, although it’ll offer monthly financing (whether directly or through a partner is not clear) as well. The Pixelbook is the predicted successor to the original Pixel, a high-end Chromebook, though this time with a screen that folds over the keyboard to become a clunky tablet, and an optional pen, while it retains the premium pricing. So that’s more or less in the Surface ballpark and a more expensive and laptop-like alternative to Apple’s iPad Pro line. Lastly, the Google Home Mini is exactly what you’d expect, borrowing from the Google Home’s slightly softer design relative to Amazon’s fairly industrial looking speakers in a smaller and cheaper form factor.

We’ll have to wait for the event itself to see all the software and feature details – these leaks are pretty much exclusively about external features and pricing – but I half wonder whether Google has allowed some of these details to leak out ahead of Friday’s iPhone 8 launch to give at least some potential buyers pause before jumping into a new iPhone. Given the breadth of the leaks, though, I suspect it’s more likely a rogue employee looking for some attention and/or notoriety. As with the iPhone leaks, I think this kind of thing benefits all of us very little while trampling on the hard work of many who’ve been prepping these devices for launch.

via Droid Life: Pixel 2 XL, Pixel 2, Pixelbook, Google Home Mini

Google's Hardware Push

Google Officially Launches Tez Mobile Payments App in India (Sep 18, 2017)

I debated whether to make this its own item today given that I covered the leak of most of the details last week, but I feel like it’s worth it to cover a couple of details that I didn’t cover the first time around, when I largely focused on the broader issue of localization in markets like India. One of the most important aspects is integration with UPI, which is the Indian government’s mobile payments technology and is unique to the country. Almost any mobile payments service in India that didn’t feature integration with it would likely be dead in the water, while UPI itself has significantly boosted interest and uptake around mobile wallets in the country (and banking in general). Secondly, Google is using Tez to test some new ideas around payments including one based on sound called Audio QR, which borrows a little from the QR-based payments that are common in China but requires less specialized software and hardware. I wouldn’t be surprised if that technology in particular made its way into Google’s existing mature-market payment services too eventually.

via TechCrunch

Google Reportedly Offers to Auction Shopping Slots to Competitors to Placate EU (Sep 18, 2017)

A few weeks back, when Google filed its proposed response to the European Commission’s investigation into its Shopping feature, I suggested that there were only a few ways in which it might comply with the Commission’s requirements: “kill its Shopping product entirely in the EU; relegate it to either the organic or paid slots on a page rather than giving it the current prominent placement it enjoys; or create a broader “comparison shopping” section above the regular search results featuring both its own and competing services.” In the end, it sounds like what Google has proposed is a combination of those things – allowing other comparison shopping sites to bid to appear in the Shopping section where its own results currently appear exclusively, while placing an artificial cap on its own maximum bids to avoid dominating the results after the change.

The latter highlights the unlikelihood that the solution will be palatable to Google’s competitors or the EU – either it forces itself to sit out entirely from the bidding process, or it will regularly beat out competitors. Google knows better than anyone else what placement in that slot is currently worth, because it’s the only company that’s ever occupied it, and it therefore enjoys an unfair advantage. It could therefore set arbitrary caps in line with what it thinks those slots are worth, allowing competing companies to take the slots it doesn’t want to and reserving the best for itself. Either this has to be an open marketplace, in which case Google’s massive scale will likely allow it to beat out competitors for every slot it actually wants (as the WSJ points out it already does in many cases), or Google has to be excluded. This is where I go back to the solutions I proposed – either open up the Shopping slot in a similar fashion to Microsoft’s Windows browser choice options, or do away with the feature entirely. This proposed solution seems unlikely to pass muster with the EC.

via WSJ

EU vs US Tech

Waymo Uses Intel Chips for Autonomous Driving Technology (Sep 18, 2017)

With data centers a big exception, Intel has struggled to take a major share of most of the new chip technology markets that have emerged over the last twenty years, failing in mobile, tablets, wearables, and others. The automotive space has been another where it’s clearly been very serious – its Mobileye acquisition being the biggest sign of that seriousness – and yet has lost out to other big chip vendors including Qualcomm and Nvidia for some big contracts. In that context, I bet it’s been begging Google/Waymo for years to let it talk abbot the two companies’ partnership in powering autonomous driving technology, because it’s something of a coup. The two companies are now finally talking about that partnership in blog posts and coverage by TechCrunch linked below. Waymo has largely developed its own computing platform for self-driving cars internally but has apparently leaned on Intel chips almost from the beginning. There’s definitely some of the article here that feels overblown – talk of scale, for example, seems odd in the context of a fleet that currently numbers in the hundreds, while the idea that autonomy and self-driving “represents a significant portion of the chipmaker’s business” also feels off even with the inclusion of Mobileye. The words “car” and “autonomous driving” barely appear in Intel’s latest 10-Q, for example, and mostly in the context of that acquisition. But this is a big win for Intel, and one that’s remained quiet for a remarkably long time. It won’t by itself dramatically change Intel’s fortunes in this space, but it’s great validation that Intel is a worthy player given that Waymo is considered one of the leading companies in autonomous driving.

via TechCrunch

Tech Disrupts Transportation