Amazon Has Discussed Teaming Up with HTC on Phones

By Amir Efrati and Jessica E. Lessin Inc. has discussed building a line of phones with Taiwanese handset maker HTC Corp., according to people who have been involved in HTC’s strategy.

The current status of the talks is unclear and Amazon, whose phone aspirations have been well documented, may have chosen another route. But the conversations show that Amazon has considered leveraging the expertise of a well-known smartphone brand to produce phones rather than oversee the design and manufacturing process on its own, like it has with tablets. (The Financial Times is also reporting on the talks this morning.)

The discussions tell us as much about HTC as Amazon. HTC appears to  be shifting its strategy as it scrambles to avoid becoming the next Blackberry or Nokia.

The Taiwanese handset maker was once the poster child for Android phones, working closely with Google on early Android devices. But it has been eclipsed by rivals, especially Samsung. The South Korean giant is running away with the handset market along with Apple.

Some analysts have said HTC, whose stock has slid dramatically since its mid-2011 peak, may need to sell or find a strategic investor if it cannot reverse its slide in revenue and profits. The company has said repeatedly it is not for sale.

With its global smartphone market share having sunk to the low single digits, HTC is pursuing a new more partnership-heavy strategy. It worked closely with Facebook to release the HTC First. The phone was the first to carry a new package of Facebook mobile software but had disappointing sales.

For Amazon, HTC has technical experience that could supplement its Lab126 hardware unit, which is heavy on design expertise. (While Lab126 handled the Kindle Fire, tablets are a lot easier to build than phones.)

HTC also has relationships with U.S. wireless carriers that could help Amazon sell phones. Amazon also has been discussing ways to preload more of its mobile apps onto existing HTC devices, according to a person who has been involved in those talks.

Spokespeople for Amazon and HTC declined to comment. Earlier this month, Amazon said it wouldn’t launch a phone this year.

Amazon has been casting about for partners for a while. This year it held talks with at least two other hardware makers about working on a smartphone. But those particular talks didn’t result in a deal, according to people who were directly involved in those discussions.

One factor complicating Amazon’s efforts is hardware-makers’ existing relationships with Google. Google, which develops Android, forbids hardware companies who build Android devices that run Google services from building devices that use modified versions of Android that aren’t compatible with current Android apps.

Amazon’s mobile software, which powers its Kindle Fire tablets and would likely be used for its possible smartphones, is derived from Android but isn’t compatible with Android apps.

An Amazon-HTC deal would put Google in a tricky position. Google is rooting for handset makers like HTC to stay alive, to counter the power of Samsung. Samsung is the dominant-maker of Android phones and therefore could theoretically develop leverage over Google. Google bought Motorola last year as a hedge.