Google to buy part of HTC's smartphone operations for $1bn

Google has announced a deal to acquire part of Taiwanese firm HTC Corp’s smartphone operations for about $1bn.

The deal will not involve the purchase of a direct stake and HTC will continue to run its remaining smartphone business.

Google has sought to beef up its hardware capability with deals and product launches, and last year hired Rick Osterloh, a former Motorola executive, to run its hardware division.

“For Google, this agreement further reinforces its commitment to smartphones and overall investment in its emerging hardware business,” the search giant said in a statement.

HTC shares were on a trading halt on Thursday. HTC is a long-time partner of Google and manufactures the US firm’s latest Pixel smartphone.

Google’s strategy of licensing Android for free and profiting from embedded services such as search and maps has made Android the dominant mobile operating system with 89% of the global market, according to IDC.

But it has long been frustrated by the emergence of many variations of Android and the inconsistent experience that has produced. Pushing its own hardware will likely complicate its relationship with Android licensees, analysts said.

“HTC is past its prime in terms of being a leading hardware design house, mainly because of how much it has had to scale back over the years because of declining revenues,” said Ryan Reith, an analyst at research company IDC.

“Unless Google really wants to control hardware for its other businesses like Home and Chromebooks in addition to smartphones, then I don’t see this as being a bet that pays off.”

HTC, which once sold one in 10 smartphones globally, has seen its market share dwindle sharply in the face of heated competition from Apple, Samsung and Chinese rivals.

Its share price has also suffered steep declines over the past couple of years. The stock has fallen 12% so far this year and the company is worth around $1.9bn.

HTC’s worldwide smarpthone market share declined to 0.9% last year from a peak of 8.8% in 2011, according to IDC. Google’s Pixel also had less than 1% market share since it was launched a year ago, with an estimated 2.8 million shipments, IDC estimates.