HTC is exploring its options. That’s exactly what the former smartphone high flyer should be doing.
An adviser has been engaged and the Taiwan manufacturer is considering bringing in a strategic investor.
A full or partial sale of HTC’s Vive virtual reality business has been discussed internally for a year or so, and I remember rumours last summer that a spin-off was imminent.
The question then, and now, is who would want to buy it, and for how much?
A Chinese company seemed, a year ago, to be the obvious candidate. The term BAT had been bandied around for a while — referring to Baidu, Alibaba and Tencent — with sources telling me the last two names were distinct possibilities. I couldn’t pin down which of the two HTC was talking to, if either.
A year later, the idea of a Chinese buyer seems to have cooled, though I suspect HTC’s advisers still hold out hope — if for no better reason than to ignite “Fomo”, or fear of missing out, among any real contenders.
That brings the discussion back to Silicon Valley, where HTC chairwoman Cher Wang spends a lot of her time. Six years after ponying up US$12.5bn to buy Motorola Mobility, it looks like Google — its parent has since been renamed Alphabet — could be flirting with the idea of buying the Vive business.
Google dumped Motorola less than three years after buying it, suggesting that its commitment to hardware perhaps wasn’t so strong after all. Having said that, acquiring Vive may not be ridiculous, because the release of its Pixel phone shows that Google may finally care about doing devices well.
Breaking with its previous approach, Google designed and built that phone from scratch — handing over final assembly to an outside partner, which happens to be HTC. The result is a wonderful handset, though ironically it’s beset with supply constraints. If Google is willing to take the same approach to VR hardware, then at the right price, a purchase of Vive could help the search engine company join rivals Facebook and Apple in this space.
Given HTC’s current market cap of NT$57bn (US$1.9bn), the fact that phones are still the bulk of revenue (and assets), and Vive remains an unproven business, Google shouldn’t pay a cent above $1bn. Yes, I know Facebook paid $2.3bn for Oculus, but it also paid $19bn for WhatsApp. Enough said.
Where such a sale would leave HTC, and its shareholders, is a bigger question. As it exists now, HTC can be thought of in two parts: no hope (phones) and bright future (VR).
The longer HTC’s string of losses — nine quarters and counting — the more important it is that the VR business delivers on Wang’s promise of renewed growth. I’ve previously argued that a merger with HMD Global, the new owner of the Nokia brand, makes sense. That probably won’t happen, and it’s unlikely anyone will want to buy the phone business on its own.
If HTC does sell off Vive, it loses that bright future. What remains to hope for? — Reported by Tim Culpan, (c) 2017 Bloomberg LP