Google Stock Forecast: Why Google Might Buy HTC Corporation’s Phone Business

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Google Stock Forecast


  • Rumor has it that Google’s purchase of HTC Corporation’s phone business is near completion. This Google move makes perfect sense.
  • My takeaway is that Google needs to acquire HTC Corporation’s phone business to protect its future Pixel Android phones.
  • HTC is the manufacturing partner of Pixel Android phones. Pixel is Google’s flagship brand for its own Android phones.
  • Buying HTC’s phone business also gives Google the factories and expertise to manufacture high-end Pixel and mid-range/entry-level Android One phones.
  • Google needs to produce and sell its own stock Android OS-only handsets to help reduce the heavy fragmentation of the Android ecosystem.

Google (GOOG) has a negative one-year algorithmic forecast from I Know First. My explanation for this is Google’s struggling phone hardware business. Its high-end Pixel phones did not sell well enough to lift up troubled phone maker HTC Corp. (HTCKF). HTC Corp. posted its ninth consecutive quarter of losses last month. Google chose HTC Corp. last year to be its manufacturing partner for its high-end Pixel Android phones.

google stock forecast

I am therefore not surprised that Google is allegedly near completion of its purchase of HTC Corporation’s phone business. HTC Corporation might an inept vendor of its brand of smartphones. However, it has the expertise and the factories to ensure the long-term continuity of Google’s Pixel phones. HTC actually makes superb Android phones but its brand has lost its market appeal. Ditto, Pixel phones are also excellent but Google only excels as an advertising service provider. Google is inept in marketing its own phones.

On the other hand, buying HTC Corp’s phone business will encourage Google to work harder as a direct rival of Apple (AAPL). Going forward, Google will have to do more to protect the long-term prosperity of Android mobile devices. Releasing high-end Pixel phones last year was the right thing to do. Google only needs to focus more on Android hardware.

Apple’s massive profitability history is because of its successful iPhone business. There’s obviously big money to be made in selling smartphones. Google can reduce its over-reliance on advertising revenue by focusing on its Pixel phones.

The version 2 of Pixel phones are coming next month. Rescuing HTC’s troubled phone business will guarantee the production run rate of Pixel 2 and future phones.

Why Google Needs To Be More Apple-Like

Google buying its own smartphone business again hopefully will educate it to be more like Apple. It failed miserably with Motorola before, but it was a greater blunder that Google sold its smartphone business to Lenovo. Google got too greedy on advertising, it gave up on hardware too easily. If Google was patient enough, Motorola would still be a top smartphone brand today. Motorola Mobility would have help Google prevent the massive software fragmentation of Android devices today.

The dangerous over-fragmentation of the Android ecosystem is compelling reason for Google to produce its own brand of smartphones now. Google has the cash hoard to aggressively roll-out a global sales network for its pure Android OS-equipped smartphones. The weak sales performance of first-generation Pixel phones was totally Google’s fault too. It failed to market them properly and never tried to get carrier support for them.

A successful smartphone hardware business from Google can help reduce the Wild, Wild West state of the Android platform.

google stock forecast

(Source: Android Dashboard)

There are more than 2 billion devices running Android but less than 16% of them run the latest Android OS 7. The fragmented state of Android devices means most of them are vulnerable to hacking and malware infections. Apple’s absolute control over iOS devices means 87% of them already run the latest iOS 10 software.

It was a mistake of Google to allow Android device vendors like Samsung (SSNLF) to pre-install any custom apps they want on their products. The problem with third-party apps from Android device markers is that it greatly contributed to a Wild West attitude to Android updates and security patches. The custom software pre-installed by Samsung and other Android device manufacturers hampered universal updates to make Android devices more secure/stable.

Samsung, Xiaomi, Oppo, Huawei created their own User Interfaces and Android app stores for their phones and tablet products. Google buying HTC Corp. will allow it to offer stock Android OS experience to customers. Stock Android free from third-party software pollution is almost as good as Apple’s iOS experience.


Buying HTC Corporation’s phone business will help Google produce its own high-end Pixel smartphones and mid-range Android One handsets. The Android One project was Google’s original plan to saturate the world with affordable stock Android OS-only smartphones. It was also a great way for Google to increase the total addressable market of its advertising business.

Unfortunately, the lack of its own smartphone factories meant Google had to rely on small Indian firms, which led to Android One to quickly fail in 2015. Xiaomi, HTC, and Lenovo are coming up with mid-range Android One handsets. However, it will still be better if Google itself will buy HTC and its factories to quickly ramp up production of Android One and Pixel smartphones. Samsung’s success in smartphones is that it has its own factories and distribution network.

My final takeaway is that Google only needs to offer incentives so wireless carriers will support high-end Pixel and mid-range Android one smartphones. Perhaps sharing a part of its mobile advertising revenue from Google-branded phones will persuade carriers to offer Pixel/Android One smartphones to their postpaid/prepaid subscribers.

The more people using pure Android devices like Pixel and Android One handsets, the better it is for Google’s advertising business. Third-party phones like those made by Samsung or Huawei are handicapped by too many CPU/RAM-consuming apps. This leads to performance degradation.

Google’s personal data gathering and targeted mobile advertising business needs Android devices to be fast and efficient. Stock Android OS devices also means there won’t be third-party app stores competing against Google Play Store on app purchases.

I am long GOOG. I rate it as a hold.

Past I Know First Forecast Success with GOOGL

I Know First’s algorithm has made accurate predictions on GOOGL in the past, such as its bullish article published on October 12th, 2016. In the article, it explains that long-term growth investors should add GOOGL and/or GOOG to their portfolios. Alphabet is deftly diversifying its business to reduce its exposure to digital advertising. It could become a major player in Enterprise SaaS. Since the October 12th, 2016 forecast, GOOGL shares increased by 16.19% in line with the I Know First algorithm’s forecast. See chart below.

google stock forecast

(Source: Yahoo Finance: GOOGL)

This bullish forecast for GOOGL was sent to I Know First subscribers on October 12th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

google stock forecast

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