Google is very close to buying HTC's smartphone business (GOOG, GOOGL)

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September 7, 2017 8:52 PM

This would be the second time Google has bought a smartphone company.

Google may be close to buying the smartphone business of HTC, the troubled consumer-electronics maker based in Taiwan, according to a report.

According to a report in a Taiwanese publication (Google Translate version here), the two companies are in the final stages of acquisition talks. The report does not say how much Google may buy HTC for.

The deal would mark a surprise return to a serious hardware player for Google, three years after it sold its Motorola smartphone subsidiary. And as Google invests more in building its own devices, like the Pixel phone, owning a smartphone subsidiary could help it mount a stronger challenge to Apple's iPhone.

Google and HTC representatives declined to comment.

A note from UBS on Thursday that cited the Commercial Times article said the deal would involve only HTC's smartphone research-and-development team. UBS said it expected that a deal would be immaterial to the financials of Google's parent company, Alphabet.

Of the potential benefits of the deal, UBS said, "Deeper integration of hardware/software would offset some of the Android fragmentation issues that do not plague Apple iOS."

Shares of Alphabet were unchanged in after-hours trading on Thursday.

History repeating itself

According to a Bloomberg report last month, HTC has been exploring its options as its smartphone sales dwindle and its virtual-reality-headset business struggles to take off, such as spinning out the VR division and selling the smartphone business.

It would be an odd move for Google, should the deal go through. In 2011, Google bought Motorola for $12.5 billion in an effort to ramp up its hardware ambitions. Motorola released a few handsets while operating as a Google subsidiary, but none of them was a blockbuster.

In 2014, Google dumped Motorola and sold it to Lenovo for $2.9 billion.

Back to hardware

But Google has a renewed interest in hardware, and it's seen it as a growth area for the company outside of its core ad business.

Last year, Google formed a new hardware division under former Motorola President Rick Osterloh that was responsible for products like the well-received Pixel phones (which Google partnered with HTC to manufacture), the Google Home speaker, and the Daydream View VR headset.

Google is expected to release an update to the Pixel phone and a new touchscreen Chromebook in October.

Do you know anything about the potential Google-HTC deal? Email skovach@businessinsider.com and you'll be kept anonymous.

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