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You are here: Home / Applications / It's Bad News, Good News for HTC
HTC Writes Off $40M, Invests $35M in Smartphone Wars
HTC Writes Off $40M, Invests $35M in Smartphone Wars
By Jennifer LeClaire / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Taiwanese phone maker HTC made two multimillion-dollar announcements on Monday, including some good news, some bad news, and a particular shift toward social, mobile, and cloud capabilities for enterprise customers.

First the bad news. HTC is taking a $40 million loss on its OnLive game service investment. The cloud gaming service just sold its technology to another company backed by Lauder Partners. In a filing to the Taiwanese stock exchange on Monday, HTC said, "Due to lack of operating cash and an inability to raise new capital, OnLive had completed asset restructuring over the weekend."

On the other hand, HTC is working to beef up its enterprise apps with a $35.4 million investment in Magnet Systems. The investment represents a 17 percent stake in the company.

"The investment will bring social, mobile, and cloud capabilities to HTC's portfolio of service offerings to its mobile enterprise customers," HTC said.

HTC's Big Bet

A Silicon Valley start-up, Magnet Systems is building a software platform that aims to accelerate the emergence of a new generation of enterprise applications. Magnet will combine social, mobile and cloud technologies to make it easier for developers to build apps with social and mobile capabilities while reducing the overhead and complexity of traditional middleware.

Andreessen-Horowitz, Alfred Chuang, a founder of BEA Systems, and Bill Janeway of Warburg Pincus are funding the venture. Chuang is serving as CEO of the company, which has already developed SalesWIN, a mobile app that helps teams work together on activities critical to winning deals.

Despite recently surpassing Research In Motion as the fifth-largest mobile phone maker in the world, HTC only holds about 6 percent of the market. HTC would have to double its market share to reach Motorola, which is in the fourth position, according to comScore. Samsung, Apple and LG are in the first three positions, respectively.

HTC's Partial Benefits

Rob Enderle, principal analyst at the Enderle Group, said the difficulty for HTC is that the company does not own the platform. Any apps that are developed for Android on the Magnet platform potentially become available to all handset makers that use the Android operating system.

"With Android, which is free, much of the investment has to be carried by the cell phone makers. So this just showcases one of the problems with Android. Somebody's got to fund it and if Google is not funding it that means you have to fund it," Enderle said.

"Some of the handset makers are now discovering what they are missing with Microsoft. Free turns out not to be free. Google ought to be making these types of investments because what HTC is doing is going to be available to Samsung and everybody else. HTC is making a huge investment and it benefits the ecosystem but you get a disproportionate amount of the benefit."

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