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.
Evan Blass, who used to publish leaks anonymously under the pseudonym Evleaks and has a great track record of accurate reporting, claims these are pictures of the forthcoming Samsung Galaxy S8. The main changes are a full screen front, with the fingerprint sensor moved to the back, while charging switches from micro USB to USB-C, and Samsung retains the headphone jack. The smaller bezel approach has been widely rumored for the next iPhone this fall, and I think what we’re seeing here to some extent is the same rush into smartwatches in the year or two before the Apple Watch emerged, driven by rumors of where Apple was going. In the smartwatch category, we saw a variety of failed attempts to create something compelling only for the Apple Watch to dominate the market when it launched, and you always have to wonder with this pre-emptive following whether competitors will really be able to crack the concept in a way that’s as compelling as whatever Apple releases. Xiaomi already has an essentially bezel-less phone, LG is reported to be moving in that direction, and now Samsung supposedly is too. It’ll be very interesting to see how this space looks at the end of the year once all these phones (including a new iPhone) are on the market.
It’s always seemed almost a point of pride with Snapchat that its user interface is unintuitive and hard to navigate, so it’s a bit surprising to see it engage in such a significant redesign of its app. But this may well make the app less intimidating to new users who’ve been put off by the previous arcane user interface, which may be an indication that Snap wants to broaden the appeal of its app beyond its current target market.