HTC’s Woeful Tale of Bad Buys and Investments

Earlier today we featured HTC’s $40 million loss in their OnLive investment, which they made in 2011.  The OnLive “evaporation” followed shortly after HTC sold back a hefty portion of Beats  Audio, another hopeful investment from the smartphone manufacturer. This got me thinking, how many times can one company make a bad investment?  Let’s find out, with a bitter trip down HTC’s memory lane.


In February 2011, HTC  purchased 5.3 million shares of OnLive stock for $7.50 per share, which amounted to $40 million.  OnLive is a cloud gaming company which aims to bring gaming to every home, even if gamers don’t own a gaming console.  OnLive seemed to be doing great until their top competitor Gaikai was acquired by Sony.  This must have stung so bad that they decided to apply for “assets restructuring,”  which includes the company being bought by their old investor Lauder Partners.  The downside of the acquisition is that  “neither OnLive, Inc. shares nor OnLive staff could transfer under this type of transaction.”  So whatever money HTC put in the company is now gone.

“Due to lack of operating cash and an inability to raise new capital, OnLive had completed asset restructuring over the weekend. HTC estimates that it will need to recognize a $40m [£25m] provision for this investment loss,” an HTC statement read.

S3 Graphics

Video game graphics have gone a long way.  If you can still remember how pixelated or odd-looking video game characters used to be compared to the realistic characters and themes we know today, then you’ve been a gamer for a very long time.  And we have companies like S3 Graphics to thank for smoothing and perfecting video graphics.  So i was a no brainer when HTC acquired S3 Graphics from VIA Semiconductor for $300 million to improve their smartphone graphics in July of 2011.  But analysts stated that the acquisition was more of a patent buy, as they also used S3’s patents in their battle against Apple.  Unfortunately, that didn’t help the Taiwanese company much.  Analysts are now stating that the acquisition should be reviewed since they’re not getting much for something they paid dearly for.

“The next focus of review should be S3 (Graphics),” said Fubon Securities analyst Jeff Pu. “After S3 lost patent suits against Apple, and given the large amount of money HTC had paid for it, I think the deal needs to be reviewed urgently.”

Beats by Dr. Dre

HTC made another investment just a month after their S3 acquisition.  The Taiwanese company shelled out another $300 million when they invested in Beats Electronics – the joint venture between Dr. Dre and Interscope chief Jimmy Iovine that makes the popular Beats By Dre headphone line.  The investment included 50.1 percent of Beats shares.  The company incorporated Beats technology in their smartphones hoping to have an edge over Apple’s iPhone and Samsung’s Galaxy line.  But as we know, Samsung and Apple are dominating the smartphone market, so that investment was a waste.

HTC seemed to have lost faith in Beats, as they’ve sold back half of the shares, but they still own the majority at 25.1 percent.  The company also realized that Beats isn’t the answer to driving people their way.  If people wanted Beats, they’ll buy the headphones and use it with the device they love, not buy an HTC phone because of the Beats integration or accessories.  Though this may seem unnerving for investors, HTC reassured them that the step was made so they can have more flexibility in expanding globally while Beats still has commercial exclusivity.