For HTC, Hope Meets (Virtual) Reality
(Bloomberg Gadfly) -- HTC Corp. is exploring its options, Bloomberg News reported late Thursday. 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 rumors last summer that a spinoff 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 B.A.T. had been bandied around for a while -- referring to Baidu Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. -- with sources telling me the last two names were distinct possibilities. I couldn't pin down which of the two HTC was talking with, 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 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 $12.5 billion to buy Motorola Mobility, it looks like Google -- its parent has since been renamed Alphabet Inc. -- could be flirting with the idea of buying the Vive business, according to Bloomberg News.
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 Inc. and Apple Inc. in this space.
Given HTC's current market cap of NT$57 billion ($1.9 billion), the fact that phones are still the bulk of revenue (and assets), and Vive remains an unproven business, Google shouldn't pay a dime above $1 billion. Yes, I know Facebook paid $2.3 billion for Oculus, but it also paid $19 billion for Whatsapp. Enough said.
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 Oyj, 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?
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.