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OPINION: Google’s Pixel talent grab is genius, but the end of HTC as we know it

OPINION: HTC has sold the team behind the Pixel phones to Google for $1 billion. Chris Smith thinks the accord is shaping up to be one of the most lopsided deals in tech history.

Something about Google’s new “cooperation agreement” with HTC doesn’t add up. It’s too one-sided to pass my smell test. Let’s break it down…

Google gets a 2,000-strong army of talent required to build Pixel phones without assistance, or deferring to a manufacturing partner. Hugely significantly, it gets access to HTC’s intellectual property library.

In exchange, the ailing Taiwanese firm gets a billion dollars to top up its dwindling coffers and the right to continue making phones, minus the some of its best hardware engineering minds.

For Google, this appears to be a masterstroke. It gets a ready-made team of world class talent, already au fait with its hardware and software ambitions. It also gets decades of patents required to compete at the top level. It’s a huge leap forward in making its smartphone operation autonomous, just like Apple.

For HTC, the agreement could briefly balance the books, but its smartphone business is still hemorrhaging money ($72 million alone last quarter) and without its top hardware talent, it’s a much tougher route back to profit.

That journey becomes more problematic now Google is essentially a competitor, using the talent (and patents) HTC nurtured to target the same high-end Android customers.

The phones Google’s former HTC engineers will create will have instant access to Android updates. HTC says it is already working on next year’s flagship, but owners of that device are likely to be waiting months on end for Android P, just like always.

What am I missing?

Look, I’m either missing something really obvious here (I’m sure you’ll let me know if so), or there’s an untold benefit for HTC we’re just not privy to yet.

When this agreement was originally rumoured as a buyout of HTC’s smartphone business, I saw plenty of sense in such a takeover.

Google would, effectively, get what it has got, while HTC will be relieved of its money-losing division and could scale down its operations to focus on its Vive VR platform, AR and AI.

It would have been a much better solution all round for HTC.

Regardless of critical acclaim, fewer people are buying the company’s smartphones. The flagships, like the U11, are losing the muster that once accompanied a top HTC release. The company has lost the prestige it had built up through years of best-in-class Android releases like the early Hero, Desire and One lines.

Related: HTC U11 review

Staying at (or near) the top is going to be harder than ever with Samsung continuing to leap forward at the top end, while half a dozen upstarts (OnePlus chief among them) are providing better value, top specs and more appealing phones.

While it would have represented a means to an end, it’s also blindingly obvious why Google didn’t want to take over the entire division.

It had already tried and failed miserably to manage an unwieldy, millstone of a smartphone company in Motorola. That experiment lasted less than two years. In the process, Google lost around nine times what it is paying for the influx of HTC’s top hardware talent.

Google has everything it needs in this deal. It doesn’t need to be dealing with HTC’s losses, it’s sprawling product line, the current executives, its corporate infrastructure and everything that made owning Motorola such a fruitless endeavor.

For HTC, it still has all of the same problems. And really, what’s a billion dollars in this climate when a product as utterly pointless as Snapchat (showing my age?) has a market cap of $16 billion?

Related: Google Pixel 2 latest

Perhaps there’s some revenue sharing accord, or a significant royalties deal on future Pixel phones we’re not privy to yet? That would certainly change the equation somewhat.

If not, the future looks bleak for what’s left of HTC’s smartphone division. If I had to make a prediction, I’d say 2-3 years from now, there’ll be no new HTC smartphones.

Apple-style model

Looking back, when Google released the first Pixel phones without a single mention of the manufacturer HTC, the gig was up. It was the end of manufacturing “partners” helping Google display its purest vision for Android and the beginning of Google switching to an Apple-style model where hardware and software bore all of its hallmarks.

The original Pixel phones were ‘Made by Google’, except they weren’t. It felt derisory towards HTC at the time, but Google was essentially considering the hardware engineers behind the phone as its own.

Now it’s a reality and one HTC will have to face up to in a hurry if wants its smartphone division to survive.

Can HTC return to prominence? Or is this deal a white flag from the company’s smartphone division? Drop us a line @TrustedReviews on Twitter.

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