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Google agrees to buy part of HTC for $1.1 billion, boosting its hardware business

  • Google announced on Thursday it signed a definitive agreement with Taiwanese smartphone maker HTC, to bolster its hardware business
  • Under the agreement, Google will acquire a team of HTC employees, many of whom have worked on its Pixel smartphone
  • In return, HTC will receive $1.1 billion in cash
  • Google will separately also receive a non-exclusive license for HTC intellectual property

Alphabet subsidiary Google announced on Thursday that it signed a $1.1 billion cooperation agreement with Taiwanese smartphone maker HTC to bolster its smartphone and emerging hardware business.

Under the agreement, Google will acquire a team of approximately 2,000 HTC employees, many of whom have worked with the company on its Pixel smartphone. As part of the transaction, HTC will receive $1.1 billion in cash.

Separately, Google will also receive a non-exclusive license for HTC intellectual property.

The move formalizes a long-awaited tie-up that could further Google's ambitions in the mobile phone and virtual reality industries and may rescue HTC's flagging business.

"This agreement is a brilliant next step in our longstanding partnership, enabling Google to supercharge their hardware business while ensuring continued innovation within our HTC smartphone and VIVE virtual reality businesses," Cher Wang, chairwoman and CEO at HTC, said in a prepared statement.

Members of the media examine Google's Pixel phone during an event to introduce Google hardware products on October 4, 2016 in San Francisco, California.
Getty Images
Members of the media examine Google's Pixel phone during an event to introduce Google hardware products on October 4, 2016 in San Francisco, California.

In a blog post, Google Senior Vice President of Hardware Rick Osterloh said the agreement will help the tech giant innovate its family of Made by Google products.

Made by Google products, introduced last fall, include its Pixel smartphones, Google Home, Google Wifi, Daydream View virtual reality headset and Chromecast Ultra. The second generation of products are set to be unveiled on October 4, according to the blog post.

"That's why we've signed an agreement with HTC, a leader in consumer electronics, that will fuel even more product innovation in the years ahead," Osterloh wrote.

The deal is subject to regulatory approvals and customary closing conditions. It is expected to close by early 2018.

News of agreement comes after the Taiwan Stock Exchange said HTC's stock had been halted, starting Sept. 21 local time, pending the release of "material information."

Taiwan-based HTC once had as much as 10 percent of the smartphone market, according to estimates from Counterpoint Research. But despite a cult following, HTC's market share has fallen since the end of 2011 to less than 2 percent.

While HTC doubled down in North America and Europe, battling the immense resources of Apple and Samsung, other Chinese brands took hold in emerging markets like India, leaving HTC without a market to fall back to, Counterpoint's Neil Shah wrote in a blog post.

Google, however, has provided a lifeline for HTC over the past few years. HTC built some of Google's Nexus tablets, and Google worked closely with HTC on the manufacturing and assembly of its first-ever end-to-end phone design, the Pixel.

Google has indicated that making its own hardware, from home speakers to phones, will be a continued focus as the company tries to specialize its software for advanced artificial intelligence and virtual reality. Those types of features require powerful phones, and HTC could help Google make them.

Further, HTC makes the high-end Vive virtual reality system. It's the third-most-popular headset in terms of shipments and market share, according to IDC estimates, which means that it likely has a strong base of app developers that could help Google compete with rivals like Samsung, Sony and Facebook.

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