Observations on the Google-Motorola Purchaseby Andrew Cunningham on August 15, 2011 11:30 AM EST
If 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.
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ssj4Gogeta - Tuesday, August 16, 2011 - linkI don't see any problem here. Apple allows IOS to run only on its own hardware. Even if Google's acquisition of Moto prevented other manufacturers from using Android in some way (which is very unlikely) they'll be just like Apple.
TypeS - Tuesday, August 16, 2011 - linkGoogle would lose in that scenario where they are the only manufacturer of Android phones. Last I checked, Apple has the biggest share of units sold of their smartphones compared to any other sole manufacturer. The fact that Android devices as whole outsell iPhone is thank to it's open platform being embraced by 20+ manufacturers.
chbarg - Monday, August 15, 2011 - linkWouldn't it be great that T-Mobile exists as another carrier.
I would like to see the business model that Google tried with the Nexus 1 to succeed. I want to be able to buy a phone at full price and then select the plan that best works for me, not just the ones that the carrier forces you to choose from.
ssj4Gogeta - Tuesday, August 16, 2011 - linkI'm glad that's how it works in my country.
sviola - Monday, August 15, 2011 - link"Also of concern to the agency is whether Google discourages its hardware partners from using non-Android operating systems on their handsets."
It is very interesting you bring this, as of last week Motorola said they would be willing to go Windows Phone if offered a deal as similiar to the one Microsoft and Nokia have. Three days later, Google buys Motorola...
rhangman - Tuesday, August 16, 2011 - linkSamsung probably sells more Android handsets than anyone and they also produce WP7 and Bada handsets. HTC are probably no.2 and they also do WP7. Seem to recall that HTC was working on their own OS to, although unlike Samsung I don't think they have released anything.
Still possible that Motorola could sell WP7 handsets since they are to remain a separate company. Can't cost much to add additional OS' to existing hardware designs. Somehow I can't see Microsoft paying Motorola money if Google owns them though.
ATOmega - Monday, August 15, 2011 - linkThis is good for Google and good for everyone really. They can continue going at the pace they want and nobody can threaten what is ultimately their well earned domination in the mobile market.
Apple has never gotten by on innovation, simply a lot of marketing and opportunism.
Fear mongers will rage ad infinitum about this, but none of their nonsense can add up to Google's sterling track record.
It's time we took this situation as more of an indicator of just how evil Apple is and realize that we don't want another Microsoft.
HMTK - Monday, August 15, 2011 - linkDid I miss the sarcasm somewhere?
ltcommanderdata - Monday, August 15, 2011 - linkIf Google really had a sterling track record they wouldn't be investigated for antitrust violations by the FTC and the Europeans for search rank rigging, aggressively duplicating and marginalizing competing services, holding Google app compatibility as a club to keep Android OEMs in line, etc. That's not to say the allegations are true, but they are hardly frivolous if there is enough substance for governments on both sides of the Atlantic to start a probe.
But this do no wrong attitude is definitely something Google believes in. Specifically, they believe that any wrong they do, they don't have to pay for.
""Zero is ridiculous," said Alsup, who rejected Google's argument that its ad sales should not be included in estimating damages from the Android system.
"They're totally wrong on that," Alsup said."
In the Oracle vs. Google Java case, both sides were asked to present estimates of damages Google would have to pay if Google was found guilty. Oracle asked for a extremely high number which was rejected. Google's estimate was also found "ridiculous" by the Judge. Google felt they owed Oracle $0 even if they are infringing on Oracle's IP, because Android is open source and free and Google's apps and services shouldn't count. So Google's position seems to be that even though they lead development of the Android platform, Android can take, copy, and steal anything they want from other companies' technology, and even if proven, Google owes the owners nothing, because the cloak of open source and free protects them.
Is this the attitude of a do no evil company? Judge Alsup certainly rejects Google's attitude.
beginner99 - Tuesday, August 16, 2011 - linkI'm not a fan of google but Oracle is probably one of the most unsympathetic companies out there.