HTC will have another flagship phone, even after billion-dollar deal with Google

HTC and Google have just made official a $1.1 billion agreement whereby a substantial proportion of HTC’s smartphone design and engineering team will move to work for Google. While the specific details of the deal have not yet been disclosed, one question has been answered preemptively by HTC’s press release: the company’s own-brand smartphone business will carry on with at least one more flagship.

“This agreement also supports HTC’s continued branded smartphone strategy, enabling a more streamlined product portfolio, greater operational efficiency and financial flexibility. HTC will continue to have best-in-class engineering talent, which is currently working on the next flagship phone, following the successful launch of the HTC U11 earlier this year.”

A streamlined product portfolio basically means HTC will cut all but the most profitable and successful models, which have traditionally been its premier-tier flagship devices such as the U11. Financial flexibility refers to the fact that HTC has been operating at a substantial loss for many months now, and shedding the salaries of the staff Google is acquiring while adding $1.1 billion in cash will indeed give the company more breathing room.

One reasonable way to look at HTC’s refusal to shut down smartphone operations entirely is that to do so would be catastrophic for the inventory the company already has with carriers and stores around the world. Nobody will want to buy a phone from a defunct company division. With the Google agreement not expected to close until early next year, right around the time when a new HTC flagship device might be expected, it’s only logical that HTC would just go ahead and complete a project it will have had in the works for a long time already.

Even so, having and releasing a 2018 flagship device hints that HTC might be doing more than just keeping on a skeletal staff to make sure its existing phone business is unwound in a smooth fashion. Could the company seriously think it can continue competing with the likes of Samsung and LG, both of which have substantial supply chain and resource advantages, and the newly enriched Google?

The scenario that makes most sense for HTC is for it to entirely offload the phone business that has been dragging it down and shown few signs of revival, and to focus all its energies on making the Vive VR platform a global success. That might still be what happens over the long run, but for the next few months at least, HTC will persist as a smartphone maker.