Google’s $1.1 billion deal with HTC is about something much bigger than making a better smartphone

    Google Pixel

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    Darren Weaver

    Google’s acquisition of a team of smartphone engineers from HTC could prove important to its future. In the short term, the team should help Google’s Pixel phones better compete with Apple’s iPhone and other flagship smartphones. But longer term, the deal fills in an important gap for Google, as it looks to compete in a world without smartphones.

Google, it seems, is gearing up for a post-smartphone world.

At first glance, its acquisition of a team of smartphone engineers from HTC might seem to be about helping its line of Pixel phones better compete with the iPhone. But to me, the deal is as much about making sure the Android operating system – and the company itself – remain relevant into the imminent next wave of computing.

Change is in the air. Over the next decade, smartphones are going to give way to smart speakers, like the Google Home, and smart eyewear, like Google Glass. And Google needs help if it’s going to maintain its leadership position in the tech industry.

Parallel lines

Google announced late Wednesday that it was going to be spend $1.1 billion to acquire a team of about 2,000 smartphone engineers from HTC. The team helped Google build its Pixel phones, and it will give the company a group of hardware experts in-house. That could help the company better compete with the iPhone and Samsung’s Galaxy phones in the smartphone market.

But I think the Google-HTC deal has a bigger significance than just Google wanting to make better phones. I keep coming back to something that Alex Kipman, Microsoft’s resident augmented-reality genius, told me earlier this year about the company’s HoloLens goggles.

Kipman made the case that augmented reality – the technology that uses special headsets or other eyewear to overlay digital images on top of views of the real world – would eventually render the smartphone obsolete. Why carry a phone when your glasses or contact lenses can project your texts, Netflix, and Candy Crush Saga straight into your eyes?

He further argued that Microsoft was uniquely positioned to bring augmented reality to the mass market. Only Microsoft, he said, has invested in all the different technologies that will be needed to build a compelling and workable augmented reality product.

Google hardware chief Rick Osterloh

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Google hardware chief Rick Osterloh
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Reuters/Beck Diefenbach

Microsoft’s HoloLens headset, one of the first augmented-reality devices to hit the market, includes sensor technology originally developed for the company’s Xbox’s Kinect sensor. The team behind Microsoft’s Surface laptops and tablets helped with the headset’s design and manufacturing.

Augmented-reality apps for the HoloLens tap into Microsoft’s Azure computing cloud and its artificial-intelligence capabilities. And Microsoft-owned game studios including Minecraft-maker Mojang helped with the user interface.

Google can duplicate some of those efforts and capabilities, but not all of them. It has expertise in artificial intelligence and cloud computing, for example. And it has some experience in developing hardware through building the Chromecast and other devices. But it lacks the deeper knowledge and experience in the hardware business that its rivals possess. Microsoft – as well as Apple and other companies – has been selling more complex devices to many more people for far longer.

So for Google, picking up this HTC team is potentially like getting a cheat code in a video game. It could let the search giant skip ahead a few years in its development as a hardware maker, potentially avoiding mistakes and more quickly finding smarter ways to get stuff done.

That’s going to be important for building winning phones, for sure. But as Google looks to play in the the computing market that succeeds the smartphone, that expertise could prove crucial.