And someone give Google (GOOG) CEO Larry Page a strong sedative. HTC has some of the more successful handsets that run the search giant's Android operating system. A switch would be bad news for Google, but this is something a person might have expected given developments in the mobile market, particularly when HTC sees danger from supposed partners like Google and Microsoft (MSFT).
A defensive defendant
The life of a hardware vendor that uses Android has gotten considerably more interesting recently. HTC, for example, has been sued by Apple (AAPL) for alleged patent infringement because of Android. Microsoft has twisted HTC's arm enough to make the company pay royalties on each handset it sells that runs Google's software.
In short, HTC, like some other vendors, has found significant extra expenses for an operating system that is touted as free. Google doesn't indemnify vendors from patent lawsuits incurred in using Android, although Google just provided HTC with some patents to use in defending itself. To look at it a bit differently, not only did Google not indemnify HTC, but now the company is making money (though chances are just a token amount) off the hardware vendor because it was sued.
Exit, stage left
Those are some of the costs of using Android. What are the benefits? That's hard to say. HTC doesn't want to enter the business of writing its own operating system. Many hardware companies are using Android, which makes creating a unique offering for competitive purposes more difficult.
Not only that, but there's a question of whether most consumers even think in terms of the name of an operating system on a phone. Last fall, the Pew Research Center found that only 26 percent of Americans knew that Google's mobile operating system was Android. How many would have been able to say which phones ran Android versus something else?
People don't buy phones with iOS, they buy iPhones. They buy Droids and Galaxys, not Android phones. So there's an economic trade-off between creating or purchasing an operating system that will satisfy customers (clearing a barrier to market) and the effective costs of using Android.
As Adrian Kingsley-Hughes argues at our sister site ZDNet, HTC probably doesn't "need" to buy a mobile OS -- which, these days, probably means webOS. But HTC Chairwoman Cher Wang's statement gives an insight into some of the motivation:
"We can use any OS we want. We are able to make things different from our rivals on the second or third layer of a platform," Wang said. "Our strength lies in understanding an OS, but it does not mean that we have to produce an OS."There it is: differentiation. Of course, there's another angle, as well, given that Google wants to buy HTC competitor Motorola (MMI) and chairman Eric Schmidt mentioned Google's interests in the products and not just the patents.
Hardware partners aren't foolish and they don't ignore such signs. Google essentially said that it looks forward to competing with the likes of HTC. Why would such a company want to help promote a main product -- Android -- of a competitor?
And forget Microsoft
Conventional wisdom might have said that a move away from Google might mean a move to Windows Phone, given that Microsoft will indemnify its manufacturers. But pushing for royalties on Android did little to endear the company to its potential partners. It's another case of some software companies acting as though they can get away with anything.
Not that HTC will necessarily buy webOS. But the seeds are there and it -- and other vendors -- realize that they are the ones that really sell the products to most consumers. Maybe Intel isn't so crazy for continuing to develop MeeGo, the operating system that Nokia was partnering on until it gave up and took on Windows Phone.
- Schmidt's Moto-Mouth Puts Google in a Tricky Position
- Memo to Google: Buying Motorola May Not Protect Android
- Hey, Wait a Second -- Don't Write Off Microsoft-Nokia Smartphones Just Yet