- slide 1 of 6
Motorola was the first company to enjoy success with the Android platform. Their Droid range helped Google’s new mobile OS to gain a good foothold in the market and the platform has gone from strength to strength ever since. The same can’t be said for Motorola Mobility, the smartphone wing of Motorola – they posted losses of $56 million for the second quarter of 2011.
So, why would Google buy Motorola Mobility? And why do it now?
- slide 2 of 6
Is This All About Grabbing Patents?
We reported on the Nortel patent auction last month. Apple and Microsoft (and a few others) joined forces to win with a bid of $4.5 billion for more than 6,000 patents. The big loser in the bidding war was Google.
This led to renewed speculation about further lawsuits related to the licensing of the Android platform. Basically companies like Microsoft are suing manufacturers like Samsung trying to secure licensing deals that force the manufacturers to pay out for every Android handset they ship. This leads to a rather bizarre situation where Microsoft could actually end up making more cash from Android’s success than Google because of their patent portfolio.
Comments from Google were quick to suggest a conspiracy against Android.
Having missed out on the Nortel patents it was obvious that Google had to have some plan in order to safeguard the future of the Android platform. The acquisition of Motorola Mobility might just be it because they hold around 17,000 patents and they have another 7,500 pending. In fact, just a few days ago, the CEO of Motorola, Sanjay Jha, suggested that the company would be looking to capitalize on their IP portfolio.
This acquisition will certainly strengthen Google’s patent defense. It won’t stop the lawsuits but it might lead to a kind of stalemate in the courts as the big guns sue and counter-sue and the only real winners are the lawyers.
There’s no doubt the patents are a big part of this deal, but surely there’s more to it?
- slide 3 of 6
Google and the Hardware Business
Going back a few years Google claimed that they were in no rush to get into the hardware business and then the Google Nexus One was released. They partnered with HTC to produce the handset and sold it directly to consumers. It was followed up by a partnership with Samsung that produced the Google Nexus S.
Neither release was exactly a disaster, but it would be fair to say they didn’t set the world on fire. Both the Google-branded Android smartphones have been significantly out-performed by other releases such as the Samsung Galaxy S, the HTC Evo 4G and even the Motorola Droid.
By acquiring Motorola Mobility Google has added a wing with a strong knowledge of the mobile market. A company capable of manufacturing a great product, bringing it to market and capturing the public’s imagination with clever advertising schemes, not to mention inroads and relationships with all the carriers.
They may have been down on their luck of late but with an injection of Google ideas and the ability to work even more closely with the Android platform we could see some amazing new Android devices coming out of Motorola.
- slide 4 of 6
The Google Brand
There is some speculation that Motorola Mobility might be merged into Google and become their smartphone hardware wing. This is not part of the plan right now -- according to Google the companies will remain separate. Obviously the relationship’s future will depend heavily on how quickly Motorola Mobility can turn around those losses and also what Google’s longer term plans might be.
A move to become a hardware and software manufacturer would give Google tight control over their mobile platform. Like Apple, they could hold sway over the whole ecosystem, but that kind of a move would be a huge gamble and it would come at a huge cost.
- slide 5 of 6
What About Other Android Partners?
The reason Google has been quick to downplay those kinds of ideas is because they work with nearly 40 other manufacturers, most notably HTC and Samsung. If these guys jump ship from Android then the platform really could be in trouble because they’ve been producing the most innovative and popular Android products.
I don’t think Google want to lose those partners and I can’t see them making Android a closed and exclusive platform that only runs on their hardware. However, the Motorola acquisition does allow them some more direct control and influence over the hardware space. They can push new smartphones in the direction they want and they’ll be able to ensure the launch of Google Wallet on a wide number of handsets.
- slide 6 of 6
Win, Win for Android
Whatever way you want to interpret the acquisition, there can be little doubt that it strengthens the position of Android in the market -- and in the patent sphere this was an essential move by Google. It may even have been provoked by Jha’s statement about Motorola Mobility looking to capitalize on their IP to “collect royalties”.
It does come at a significant cost to Google, not just the $12.5 billion price tag, but also the fact that Google shares have dropped in value. It’s also a big commitment to an area that they haven’t enjoyed any real success with -- hardware.
Despite the risks involved I think this is a good, strong move from Google and in light of the Microsoft and Nokia partnership it looks to be setting up the mother of all mobile wars. Who will win? I’m betting on Google.
What do you think? Post a comment.