Never Mind the Lawsuits, HTC is on a Buying Spree

Taiwanese smartphone maker HTC has been on a buying spree to reshape its business and help defend against lawsuits, though it remains to be seen if the strategy will help it gain ground on rivals such as Apple, Samsung and Research In Motion.

By Jason Tan
Tue, September 06, 2011

IDG News Service — Taiwanese smartphone maker HTC has been on a buying spree to reshape its business and help defend against lawsuits, though it remains to be seen if the strategy will help it gain ground on rivals such as Apple, Samsung and Research In Motion.

HTC has bought or invested in at least six companies this year, many of which provide technologies to improve how users consume and share content on its devices. It's a big change for the Taiwanese manufacturer, which focused for much of its existence on hardware, leaving software and content to its partners.

Times have changed, however, with rivals like Apple and Nokia building whole ecosystems around their products, including app stores and content delivery systems. HTC has shifted its focus before, moving from contract manufacturer for Microsoft's smartphones to selling its own HTC-branded devices. It must now evolve once more.

"It is no longer enough to focus only on hardware innovations," said Ryan Lee, an analyst with Taipei-based Topology Research Institute. HTC's acquisitions, which include both technology and patents, "pave the way for HTC's greater competitiveness," he said.

HTC ranked fifth in worldwide smartphone sales during the second quarter, behind Apple, Samsung, Nokia and RIM, according to IDC. But HTC was among the fastest-growing vendors, more than doubling its shipments to reach 11 percent of the market, up from 7 percent a year earlier.

HTC's latest investment came Aug. 11, when it said it would pay US$309 million to acquire 51 percent of Beats Electronics, the maker of headphones endorsed by rap producer Dr. Dre. HTC said the deal would enable it to put "recording-studio sound quality" into its smartphones and reach a younger audience of users. It also put it directly into the market for phone accessories.

Just a week earlier, HTC said it would spend $18.5 million to buy Dashwire, which sells a technology that lets users back up photos, contacts, text messages and other smartphone data in the cloud, and to access that data from a PC Web browser. HTC said it will integrate the service with HTC Sense, its user interface for Android phones.

HTC's competitors are also building cloud services -- notably Apple's iCloud storage service, unveiled in June. They are also using other weapons, including technology patents. In March last year, Apple sued HTC for alleged infringement of 20 patents related to the iPhone's user interface, hardware and "underlying architecture."

HTC seemed caught off-guard by the lawsuit, which some analysts have said could eventually require it to pay royalties to Apple. But HTC has shot back with lawsuits of its own, and this year it turned to another acquisition for help.

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