Blog – September 2017


Has HTC thrown in the towel?

The mobile phone market moves at a pace that  most other industries would struggle with.

The latest move was the acquisition by Google of the “Powered by HTC” team at HTC – essentially those involved in producing the Pixel phones for Google – about 20% of the workforce. The sum paid – a cool $1.1bn representing c.60% of the current market value of HTC.

HTC has been loss making for some time, and is outside the top 5 manufacturers, with less than 1% of the market –  down from a peak of 11% on 2011. This does appear to be an acknowledgement that the future is more likely to come from its work on VR headsets than smartphones.

For Google, they have been here before, buying what was left of Motorola back in 2012 – and then selling the business (less the patents) to Lenovo – for what was on the face of it a $10bn loss. However as always in M & A the devil is in the detail – and Motorola held substantial cash and deferred tax assets that mitigated the loss. It was also able to negotiate a deal with Samsung and fend off Apple based on the IP retained.

The rationale this time round is more difficult to establish – officially it strengthens their consumer electronics play – however it was perhaps more a case of securing supply – with the future of HTC uncertain. Still, with a market cap of $650bn – it’s small change!