Google Paying HTC $1.1B to Bring Over Parts of Its Smartphone Team - Page 2

Historically, the deal has some similarities to the lifeline $150 million share purchase Microsoft offered Apple in 1997, said King. "Though Google's deal won't result in any shareholder status, it still offers a critical partner some financial breathing room. That's a good deal for both companies."

Another analyst, Jan Dawson, the chief analyst of Jackdaw Research, agrees, saying the deal has echoes of Microsoft's bailout acquisition of Nokia several years ago. "HTC is a far less important strategic partner to Google, but this very much feels like Google offering a financial lifeline to the very unprofitable and shrinking HTC in return for some assets it needs," said Dawson.

"Those assets are IP necessary to make Pixel phones without being sued by HTC or anyone else, but also [bring] the research and design skills necessary to build those phones exactly to Google's specifications and needs rather than having to work off HTC's foundation and platform, [which was] originally built for other devices."

This optimization and resulting deeper integration with Android "are going to be critical for Google to squeeze the most out of its hardware efforts, though it also needs to go deeper on the chips side, something it's been reported to be doing separately," he said.

"From HTC's perspective, the cash infusion will give it breathing room to continue working on a strategy that can again provide sustainable profits in the long run, presumably with its Vive VR business at its core," said Dawson. "I do wonder why Google didn't just buy the whole company—at under $2 billion market cap, Google could presumably have paid roughly double what it is and had the whole thing, taking what it needed, including manufacturing capability, VR hardware expertise and other useful pieces, and shut the rest down."

At the same time, Dawson said HTC's viability remains in doubt, even with the cash from Google. "I'm still not sure I see a viable future for HTC even with this investment and the attendant changes," he added.

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