Google's $1 billion acquisition of 2,000 HTC employees could be risky (GOOGL, GOOG)

Google announced that it's spending $1.1 billion to hire roughly 2,000 employees from the “Powered by HTC” division of Taiwanese smartphone maker HTC for its Pixel business,accordingto Bloomberg.

A large share of these engineers worked on the first Pixel — Google partnered with HTC to make the phone. Google will also receive non-exclusive licenses to a handful of HTC’s patents. The purchase, expected to close by the beginning of 2018, is a sign that the company is taking its new hardware division seriously.

For its part, HTC remains committed to its own smartphone and virtual reality businesses, CFO Peter Shen saidduring a press conference in New Taipei City. The company will continue to work with the 2,000 employees who are being transferred after the deal closes.

Google has some good reasons for purchasing the Pixel staff from HTC.

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But, it’s also a potentially risky move.

Nonetheless, tighter integration between software and hardware will give Google greater control over the Android ecosystem. The Pixel is in part a diversified revenue driver, but it’s also a bellwether for the rest of the Android smartphone market, designed to showcase what the OS and its services — including Google Assistant — are capable of. Controlling the whole of the device will allow Google to better achieve this vision. And as Samsung and Huawei forge ahead with their own AI, AR, and OS efforts, it’s more important than ever that Google maintains its status as the global leader in smartphone OS.

The communications market is in the midst of an all-out war. The deluge of messaging apps, such as Facebook Messenger, WhatsApp, WeChat, and Viber, have over-run the segment traditionally owned by SMS.

And consumers are beginning to view these chat apps not as messaging platforms but as portals to the internet. This is threatening the control Google and Apple have over the mobile ecosystem via Android and iOS.

But an emerging messaging standard called Rich Communications Services (RCS) is showing promise as a solution for these players.Google is wagering that RCS will make Android more competitive with iOS while improving the attractiveness of the OS's native messaging client compared with chat apps.

Laurie Beaver, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on the Android messaging evolution that:

You can also purchase and download the full report from our research store.

Google's $1 billion acquisition of 2,000 HTC employees could be risky (GOOGL, GOOG)

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