Observations on the Google-Motorola Purchase
by Andrew Cunningham on August 15, 2011 11:30 AM ESTIf you've been on the Internet for very long today, you've probably already heard about this: Google intends to purchase Motorola Mobility Holdings for $12.5 billion, or about $40 a share. The deal, Google's biggest acquisition ever, has been approved by the boards of both companies.
There are potentially far-reaching implications to this deal in both the long and short term: more immediately, Google will gain access to Motorola's massive portfolio of 17,000 patents and 7,500 patent applications (for reference, the Nortel bid that Google lost to Microsoft and Apple earlier this month ago was for just 6,000 patents). This will help Google face the wave of litigation that nearly every company in the smartphone market is currently trying to ride. In the long run, as the companies become more integrated, we could see Motorola phones that exhibit an Apple-like synergy between hardware and software. And that's just the tip of the iceberg.
What does it mean for Android?
In a blog post announcing the deal, Google CEO Larry Page was careful to note both that the "acquisition will not change [Google's] commitment to run Android as an open platform" and that "[Google] will run Motorola as a separate business," meaning that other manufacturers will be given the same access to Android that they currently enjoy and that Motorola, for the moment, would continue to run as a separate entity and would not receive preferential treatment as an Android licensee.
For the moment, this is likely to be true. Google won't want to deal with an exodus of hardware manufacturers from Android to competing platforms, and even if the stated goal was a tight integration between Motorola hardware and Google software, this would take time to achieve.
Surely, as time goes on, Google will begin to give some form of preferential treatment to Motorola and its handsets, whether in the form of early access to software updates (as we've already seen with the Xoom and Honeycomb) or in features developed specifically for Motorola phones. Even so, Google will likely work to give third parties the same sort of access they have today, since the company's success has come from getting Android on as many devices as possible rather than at trying to beat Apple at its own game.
What of Microsoft?
As mentioned above, Microsoft could potentially see increased interest in Windows Phone 7 from handset makers worried about subpar treatment from Google, but Windows Phone 7 has had such a hard time gaining traction in the market that this seems unlikely.
What is more likely is that Microsoft will try to follow suit and buy up its own smartphone company - some have suggested that Nokia, a company with whom Microsoft already has a cozy relationship, could be a potential acquisition target, and Nokia's stock is currently up about 10% on this speculation.
Rumors of a Microsoft-Nokia acquisition were swirling earlier this summer, but Nokia called them "totally baseless" at the time, and there are no indications that things are any different now. Still, especially as the patent wars heat up, expect to see more acquisitions as companies try to beef up their portfolios and shore up their businesses.
Clearing The Regulators
The last thing to consider is whether the deal will actually go through at all: both companies approve, but the deal still has to clear the hurdle of the Federal Trade Commission, the US agency responsible for antitrust regulation.
The FTC already has its eye on Google: primarily, the FTC wants to make sure that Google isn't using its dominant position in the search market to promote its other products as it continues to diversify its business. Also of concern to the agency is whether Google discourages its hardware partners from using non-Android operating systems on their handsets. This investigation is still in its early stages, having only started in June, but the scale and scope of the Motorola purchase will be sure to raise some eyebrows.
Despite this, I would say that the likelihood of FTC interference in the Google-Motorola deal is pretty low, since it's not a stretch to say that there's still a lot of very healthy competition in the smartphone market - Android has grown by leaps and bounds in the last couple of years, but Apple and the iPhone are both still very healthy, and Microsoft is taking aggressive steps to increase the presence of Windows Phone 7 in the market. Regulators would be smart to scrutinize the deal, but they probably won't stop it.
Facebook
Twitter
RSS
56 Comments
View All Comments
xype - Tuesday, August 16, 2011 - link
Sounds good for Google. Two questions remain:1) How many of those patents are enforceable? Motorola might have 25k patents, but for all we know 99.99% of those Apple, Microsoft, Nokia etc are safe against as they implicitly licence them when purchasing the controller chips for their hardware. In that vein, how many of those patents can be used against Apple as "Android protection" directly vs. being general hardware manufacturer patent ligitation material?
2) How well are the other Android handset makers really taking this? Sure, they’re all happy now—but it wouldn’t be the first time a vendor did a purchase like that and claim everything was fine and dandy right up until the moment they brought out their own, well-integrated, well-marketed product whose software/hardware advantage "for technical reasons" couldn’t make it to other devices quickly enough. Heck, weren’t Android tables and Android 3.0 a bit like that? "Now you have the source! Now you don’t!"?
Zingam - Tuesday, August 16, 2011 - link
My bet is that Google will eventually sell off the hardware assets and keep the patent portfolio. Why in the world would Google want to become a hardware manufacturer. Making hardware is hard and not as profitable as making software.It would be a big mistake if Google pisses off the rest of the manufacturers and what I think is very important Google should reduce the fragmentation as much as possible. iPhone is so successful not because there are 1000 different models but because there is just one model each year that is highly recognizable and easy to select. If you have 20 different sets and you have to worry if your apps will work on a particular set, it will be much easier to pick an iPhone because you know that all apps will work on it. It is the same as consoles vs. PC. That's why I am put off by gaming on a PC is because I never know if the new game will run acceptable on my expensive PC. When you have a console, you know that each game you get, will run equally good on any console and you don't need to worry about hardware compatibility.
That for me is more important then having the latest tech. Too expensive and too many problems kill the fun.
xsilver - Tuesday, August 16, 2011 - link
This is the exact reason WHY I do game on PC; every game released on console now is programmed for severely outdated hardware; the only time you see innovation is when new hardware comes out. Why not have that stagnated over several instances in time.When you buy a new pc, it will run new games; if its 3 years old, you will have to check.
How can you honestly expect a 3 year old pc to run a brand new game perfectly.
Its like asking why a ps3 game doesnt work on a ps2
Finraziel - Wednesday, August 17, 2011 - link
Yeah, exactly what I thought as well. It is a very good analogy... I did buy an xbox 360, and I do enjoy it (for kinect if nothing else), but I also find that games just don't look and play as well as on a well-specced pc. So yeah, it's at the same level of quality for everyone, but the level of quality for the PC is still better.The same goes for iphone, yes, you can be sure that all apps available to iphone will run on your iphone... but on android I can do stuff that I could not on iphone. Same thing, I choose to deal with a little insecurity about if everything will work as it should, for the potential to be able to do much more.
TypeS - Thursday, August 18, 2011 - link
The whole PC > console argument is really one that goes nowhere. To begin with, a PC that will handle current gen titles (with "stunning" graphics") and run them at a playable fps will run you at least twice the price of the consoles available. Not to to mention the constant upgrading adds to that cost and while if you buy into a platform right at it's launch, it'll survive 2-3 upgrades before you need to start swapping parts like the power supply or motherboard and cpu. And the games that offer those awesome graphics on PCs usually need graphics cards that cost as much as a console alone.This is the same situation with smartphones at the moment and why Apple's iPhone was so quickly propelled to the top. It's not about performance, it's about the entire experience.
shenjing - Tuesday, August 16, 2011 - link
Come go and see, will not regret it Oh lookhttp://www。ifancyshop。com
Shadowmaster625 - Tuesday, August 16, 2011 - link
Nokia stock is bouncing off a 10+ year low. It is extremely oversold on the weekly chart. It may technically be "up 10%" but it is still some 20-30% lower than it was 3 months ago.medi01 - Tuesday, August 16, 2011 - link
1) Exactly how is Google going to profit from developing android platform? This deal seems like a move to save android from lame US patent system. But regardless, ignoring 12+ billion deal, how does one make (a lot of) money with free to use product?2) Why don't phone manufacturers go multiplatform? Let consumer choose, if he wants android, WP7 or (god forbid in brainwashed US) Symbian, why not? Too pricey?
TypeS - Thursday, August 18, 2011 - link
Are blind or intentionally ignorant? To answer your questions:1) How else do you think google pays for it's staff and all its software development? Ads. It runs a large network of targetted ads that companies pay for as well as it owns Youtube. The same goes for Android as well and ads you get on there through apps. This has been Google's money maker for years now (the online ad business)
2) How do they not... ? HTC offers both Android and WP7, so does Samsung. Nokie offers WP7 and until recently Symbian but killed it. Sony was Android and Sybian (though they're last release was the Satio). Symbian is just about dead. How is choice not already given?
mosu - Tuesday, August 16, 2011 - link
But Apple and Microsoft won't aloud that to happen, at least in US.this should be a window opportunity for asian manufacturers.On the other hand, it is a good thing that Google has now it's own handset manufacturer in US and needs just OMAP to complete the circle of hardware support.