The transaction represents major milestones for both companies, but for different reasons. Here's what it means to Google and HTC.
What The Deal Means For Google
It is important to note that Google did not buy the entire smartphone division of HTC, but rather only its design and engineering arm. Included in the deal are 2,000 smartphone engineers from HTC who helped Google in building its Pixel smartphones, and they will now serve under Google as in-house hardware experts.
The transaction provides Google with in-depth hardware knowledge and experience that would allow it to develop better products amid the intense competition against rivals such as Apple and Microsoft.
Google's acquisition of the design and engineering arm of HTC's smartphone division will put it in a better position to provide a better challenge against Apple, which recently unveiled the $1,000 iPhone X. However, the hardware expertise that the company acquired will dive deeper than that.
The deal with HTC also proves that hardware development is still very important to Google, despite the trouble that it suffered with its acquisition of Motorola. Google purchased Motorola for $12.5 billion in 2012, but sold the business a couple of years later for less than $3 billion to Lenovo. The two transactions are very different though, as Google is primed to fully take advantage of the assets that it acquired from HTC.
What The Deal Means For HTC
While Google saw the transaction as a chance to launch itself to greater heights, HTC's sale of part of its smartphone division comes as a necessity, as the company continues to struggle despite the success of its Vive virtual reality business.
Previous reports claimed that HTC was thinking of possibly selling its Vive VR business, not its smartphone division, and one of the possible buyers was Alphabet's Google. HTC's core business as a smartphone manufacturer has fallen by the wayside amid cutthroat competition, and a sale of the Vive VR business would have given it a much-needed infusion of cash.
After the transaction with Google, however, HTC will still release a 2018 flagship smartphone, perhaps because the device is already too far into development to cancel it now. The company's plans after that are still unclear, but given that HTC kept its Vive VR business and will likely keep its smartphone business until its 2018 flagship device is released, HTC could soon solely focus on virtual reality.