Google cranks up mobile war with HTC swoop

Google today laid out its ambitions in smartphones with a $1.1 billion deal with struggling mobiles maker HTC to challenge Apple and Samsung.

The web giant, which was fined a record €2.4 billion (£2.1 billion) by the EU in June for rigging search engine results, is paying $1.1 billion (£813 million) to take on around 2000 staff — half of HTC’s research and development division.

The Californian company will also get its hands on the Taiwanese firm’s intellectual property.

The 2000 HTC staff have already been working on its Pixel phone, which runs on Google’s Android operating system.

HTC shares were suspended on the Taiwanese stock exchange yesterday amid rumours of a sale to Google.

It is not a full takeover however, which industry experts see as a way for Google to fast-track the deal.

The move has been seen as a statement of Google’s intent in hardware. It has dominated in software — its Android operating system is supplied to most smartphone makers — but it has struggled for dominance in a smartphone market controlled by Samsung and Apple.

Google’s $13 billion takeover of Motorola Mobility in 2012 was a flop — it sold it for less than $3 billion just two years later to China’s Lenovo after failing to compete with the iPhone.

Rick Osterloh, a former Motorola executive who joined Google last year to spearhead its push into hardware, said the deal was the tech giant “continuing our big bet on hardware”. He added: “It’s still early days for Google’s hardware business.”

The deal comes as Google, co-founded by Sergey Brin and Larry Page, prepares to launch new products in two weeks.

It is expected to unveil two new Pixel phones and a Chromebook laptop. Last week, Apple unveiled three smartphones, the iPhone 8, 8 Plus and the premium X.

HTC chief executive Cher Wang said: “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.”

It is Google’s fourth major hardware acquisition after deals for Motorola Mobility, home automation firm Nest and video camera outfit Dropcam.

Edison analyst Richard Windsor said the risk to the HTC deal is “once again, Google’s culture, which has made the other hardware acquisitions feel like unwanted orphans that have no business being part of Google”.

He said investors in Alphabet, Google’s parent which is valued at $650 million on Nasdaq, were left “considerably worse off” by previous deals.