If reports from Focus Taiwan are to be believed, HTC might be planning to separate its virtual reality division. A new company will be developed and will be completely owned by HTC. In the beginning, Cher Wang will be the chairwoman of the company.
After some unsuccessful mobile launches, HTC is in a bad condition. With this spinoff, it might be able to revive its position. After the news of the spinoff, HTC’s stock rose 5 percent in Taiwan. If HTC carries out this plan, we might not see HTC’s branding on future virtual reality headsets.
Reasons for the Possible Separation
As mentioned above, one of the reasons for the separation, is to remove any links of the VR device from the smartphone industry. HTC is struggling in the Android market and the revenue is declining. By separating the upcoming VR efforts from the smartphone section, they would be at a lesser risk of collapsing. The company wouldn’t want to have a successful VR product only to be brought down because the sale of HTC-branded smartphones has diminished. With the separation, HTC will own the new company but it will have a different revenue source. So, if the parent company fails, it won’t affect the new company.
Another reason could be that HTC will have a high opportunity to come up as a strong brand. VR is yet to go mainstream. However, with the technology and potential of Vive and with the gradual progress of the VR industry, it could turn out to be a leader in the VR market.
With a separate company, HTC could have dedicated workforce to fully focus on the development of more amazing virtual reality products. This could grow the confidence of employees and they would not leave for competitor companies.
A Gamble to Take
While the VR section might benefit from this separate company, it might be a risk for HTC, as the company’s valuation might decrease. It could lose one of its most important assets and investors could sell their assets as a result. For instance, with eBay’s split from PayPal, the stock price of eBay has been halved, even though PayPal has got more new opportunities.
Same goes for HTC. If the virtual reality section finds success, its stock price might rise, as long as HTC maintains a controlling stake on the new company. It’s a gamble that HTC has to take if it wants its Vive headset and future VR products to be successful and not get affected by the increasingly competitive mobile industry.
What’s your thought?
What do you think about the possible spinoff? Will it help HTC get back its market? Share your thoughts in the comments below.
Image Source : seattletimes.com