What Google discovered is that most handset makers don't make much profit on the hardware; and because it wasn't interested in investing more money into Motorola, it decided instead to simply keep the IP and hardware patents, Nguyen said.
"The Microsoft Surface, again similar to Google's Pixel, was not mean to outsell or compete with Asus or Dell or whomever," Nguyen said. "They were trying to promote the platform and show how it could make a nice, high-end device. They were saying, 'We want you to follow our lead.'"
Google and HTC already have a history of teaming up on handsets. HTC worked with Google to produce its first smartphone, the Pixel; the next version of the Pixel is expected to be announced Oct. 4.
Google's hardware play is also likely to extend beyond smartphones, with tighter hardware and software integration for its new Chromebook, expected to be called Google Pixelbook.
Google also makes the Chromecast streaming device and Google Home, a smart speaker, and it's enabling third-party speaker manufacturers to use its Google assistant on their devices.
"So again, what I think we're seeing is Google building up their capability because they recognize that the strategy Apple has pursued works in many hardware categories – the deep integration of hardware and software," Gillett said. "Google is now seeking out a flagship position in multiple hardware markets to prove to the market and its partners that this is the vision; now, compete for the rest of the market and challenge us for the flagship position."
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