Replies to post #419225 on InterDigital Inc (IDCC)

[Paullee]

What Google Wants With HTC’s Smartphone Business
The deal carries risks—but Google needs more scale to maintain its influence in the smartphone business

Google & other betsx2013x$51.21 billion
By Dan Gallagher and Jacky Wong
Sept. 21, 2017 4:41 a.m. ET
1 COMMENTS
If nothing else, Google’s deal with HTC should settle the question of whether it is serious about making its own phones.

Not that $1.1 billion is a heavy sum for a company with nearly $91 billion in net cash on hand. Alphabet Inc.’s GOOGL 1.14% Google actually spent 12 times as much six years ago to buy Motorola Mobility. But that purchase was more about acquiring patents than about dabbling in phone hardware, and Google got out three years later, after Motorola racked up a cumulative pretax operating loss of $2.7 billion.

The deal with HTC announced Thursday is very different—and less risky. For its $1.1 billion, Google is getting the large HTC team that helped develop Google’s first branded smartphone, the Pixel, launched late last year. The Pixel drew strong reviews, but its success has been constrained by production problems. IDC estimates Google has sold about 2.8 million of the smartphones globally, which would translate into a market share of about 0.2%.

Hiring a couple of thousand engineers from HTC won’t solve that problem right away. Though once a strong No. 2 to Samsung in smartphones running on Google’s Android operating system, HTC—like Motorola before it—has been steamrollered by Samsung’s manufacturing and marketing prowess. From a peak of more than 44 million in 2011, sales of HTC smartphones fell to less than 14 million last year, according to IDC. Samsung’s shipments exceeded 300 million phones.

Can’t make them fast enough.
Can’t make them fast enough. PHOTO: MICHAEL SHORT/BLOOMBERG NEWS
But Google doesn’t need to match Samsung’s numbers to be a success. Nor is this deal necessarily about Apple-hardware envy. Increasing the Pixel’s share of just the premium segment would benefit the features and services Google is looking to deploy for all Android phones—such as its artificial-intelligence-powered Google Assistant software—and so help keep Android users on board.

In the long run, Google’s scaled-up efforts in phones could be bad news for other makers of high-end Android smartphones. For all of Samsung’s scale, most of its profits came from the premium segment, and one more big player could hurt that important business. And apart from beefing up its hardware, Samsung has been trying to differentiate its smartphones by offering its own versions of services like a virtual assistant and a payment system. But most users still prefer Google’s.

The smartphone business is brutally competitive, so Google—even with its deep pockets and acquired talent from HTC—is taking a gamble. But this time, it’s a manageable one.


Write to Dan Gallagher at [e-mail] and Jacky Wong at [e-mail]

[my3sons87]

O'dog the Berlin Office is a smart move on IDCC's part. As I recall Germany is much better at affording patent infringement cases than the US.