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.

Comments Locked


View All Comments

  • TypeS - Tuesday, August 16, 2011 - link

    Unless you've been living under a rock, you left some pretty important hard facts. First that when Android was first being developed and at launch, Java was still Sun's IP and Sun had allowed Google to use it's Java IP for it's OS. Oracle than bought out Sun and therefore is now the owner of Java. Oracle did an about face suddenly said "Nu uh, we want to be paid for that or we'll sue you."

    And Oracle' suit isn't going so well as it seems evidence has been found that Sun did indeed allow Google to us etheir IP (not steal or copy it as you conclude). So do us a favour and enlighten yourself before you say Google infringed on someone's IP without their consent, Oracle has been the deceitful one about the use Java in Android.
  • steven75 - Tuesday, August 16, 2011 - link

    LOL. Thanks for the laugh.
  • name99 - Monday, August 15, 2011 - link

    "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."

    Google explicitly claimed they would NOT do this, that they would treat Motorola no differently from any of their other Android partners. This may or may not be true but certainly the official story is no "Apple-like" integration.
  • ltcommanderdata - Monday, August 15, 2011 - link

    If they aren't intending to extract any synergy between hardware and software then why buy the hardware division? Google could have bought relevant patents from Morotola or negotiated a license for Motorola's patents for Android that covers all Android makers. This would have saved themselves money too versus buying the whole company. Perhaps Motorola's financial situation or sales forecasts were more shaky then they let on and they needed a bailout?
  • xype - Tuesday, August 16, 2011 - link

    Either that or Google is planning to pull a Zune on the other Android phone makers. "Plays for sure, dudes!".
  • ssj4Gogeta - Tuesday, August 16, 2011 - link

    I don't pretend to understand how it all works, but if Google just licensed patents for Android, they probably wouldn't be able to sue MS or Apple back using those patents. That is the main reason I think. From what I've read in some articles Motorola owns a lot of patents in key areas which MS and Apple may be able to be sued for.
  • Belard - Monday, August 15, 2011 - link

    Nobody should have to play these games. FTC should see that apple is causing problems with vague lawsuits. This could be good for Android overall... allowing Motorola to be the launch platform for new releases, without bouncing between makers, doing NDAs etc. With all phone makers in danger from apple and even MS to some degree (the nortel deal) ... they'll welcome this... including Motorola which only makes Android phones.

    One thing is for sure... in an apple boardroom. I'm betting some loud F-bombs went off... and MS has just called up Nokia, letting them now that they'll have new masters. At this time WP7 cannot survive without Nokia and visa-versa... and I think it'll be a good fit. MS will never be as open as Android... so this is their best bet to stay in the game and also even improve wp7 development.

    When that happens, Samsung and others will drop WP7... not that it will hurt anyone.
  • xype - Tuesday, August 16, 2011 - link

    Why is it always Apple who are the bad guys? Those companies are all equal offenders, from Apple to RIM. Besides, Motorola first sued Apple, didn’t they?

    Apple isn’t the only ones "causing problems with vague lawsuits"—but they, just like everyone else, do and have to protect their investments, inventions and designs. Just because Google went in all starry-eyed and treated everything like a free buffet that doesn’t mean that everyone else will see the errors of their ways and kiss and make up.

    Besides, even if the system is broken now, it’s still way better than a "free for all" that many people think IP should be handled as. That would be even less fair and would stifle innovation even more.
  • worldbfree4me - Monday, August 15, 2011 - link

    As an amateur investor I actually had Goog buying RIM this year and never saw the MOTO deal coming. Considering MOTO is sitting on about $3 Billion in Cash right now the net deal actually turns out to be less expensive than buying those 6000 Novell patents that MS and tried to extort Goog into buying at a huge marked price for about $4 Billion.
  • B3an - Tuesday, August 16, 2011 - link

    MS did not extort Google in any way. MS ASKED Google if they wanted to join in on the bid for the patents, Google said no. MS even posted the emails when Google started crying and saying the crap you are. And MS, Apple and RIM bought the 6000 Novell patents, not just MS.

Log in

Don't have an account? Sign up now