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HTC deal to sell part of smartphone assets to Google approved

2017/12/16 14:13:27

Taipei, Dec. 16 (CNA) A deal for Taiwan-based HTC Corp. to sell part of its smartphone assets to U.S. tech giant Google Inc. has been approved by the government, according to the Investment Commission.

In a statement released on Friday, the commission said it has approved an application filed by HTC to dispose of its smartphone ODM assets to Google for US$1.1 billion.

The prominent acquisition deal, announced by HTC in September, has caught much attention from the market, and the commission, as expected, kicked off a swift process to review the application and issued the green light at a quick pace, market analysts said.

Under the agreement between both sides, the assets HTC will sell to Google include a development team which is responsible for making smartphones for Google on a contract manufacturing basis.

After the acquisition, about 2,000 engineers under HTC will work for Google, while the deal will also allow the U.S. buyer to receive a non-exclusive license for HTC intellectual property.

The smartphone development team to be sold to Google has focused on Google's Pixel model development, providing ODM services to the U.S. client to roll out these particular models smartphones.

HTC has built good business ties with Google, as the Taiwanese firm started to produce Google's Pixel and Pixel XL smartphone models on a contract production basis last year.

Despite the disposal of the ODM assets for Google, HTC said it has another smartphone development team of about 2,000 engineers that is in charge of developing models under the brand of HTC. The Taiwanese brand emphasized it will continue to roll out HTC-branded models in the future.

But market analysts are not upbeat about HTC's outlook after the deal.

In a recent research note, Taipei-based advisory firm TrendForce Corp. said the disposal of the smartphone ODM assets could hurt HTC's research and development capability.

"This deal therefore suggests that HTC will eventually withdraw from the smartphone market on account of years of weak performances," after it is set to cut about 70 percent of its R&D resources through the disposal to Google, the advisory firm said in the report.

Following the approval from the government, HTC is expected to complete the transaction and book the proceeds in early 2018 to strengthen its virtual reality business and boost its loss incurring from smartphone operations, market analysts said.

Analysts said the ODM assets to be sold to Google are one of HTC's important revenue sources but the disposal of the smartphone resources is expected to impose a negative impact on the Taiwanese firm's bottom line in the long run.

HTC posted NT$3.1 billion (US$103 million) in net losses for the July-September period, topping a net loss of NT$1.95 billion in the second quarter. Its loss per share for the third quarter also grew from NT$2.37 in the second quarter to NT$3.8, marking the 10th straight quarter the company has reported a net loss.

On Friday, shares of HTC gained 1.62 percent to close at NT$69.80 on the Taiwan Stock Exchange, outperforming the weighted index, which fell 0.44 percent to end at 10,491.44 points in the wake of foreign institutional selling.

(By Liao Yu-yang and Frances Huang)