How HP, Google News Will Affect Microsoft

By Nicholas Kolakowski  |  Posted 2011-08-21 Print this article Print


Microsoft's future is also determined by other players in the tech space, and those players made some big moves this past week. On Aug. 18, Hewlett-Packard announced it will explore "strategic alternatives for its Personal Systems Group (PSG)," its PC arm, including a possible spin-off. That, combined with the summary execution of the webOS ecosystem, appears to be the beginnings of a plan to consolidate the company's operations around services and software, imitating in many ways the model established by IBM some years ago.

While the failure of webOS could possibly boost Microsoft's fortunes in the smartphone arena, by removing a competitor to its Windows Phone, HP remains the largest producer of Windows PCs. Chucking its PC division will almost certainly have some sort of effect on Microsoft, but at this early stage it's impossible to predict with any accuracy how any of this will play out in quarters to come.

If that didn't make things complicated enough for Redmond, Google announced during the week that it will acquire Motorola Mobility (and its extensive patent hoard) for $12.5 billion. That represents both a challenge and opportunity for Microsoft: On one hand, it could complicate the tangled legal battles over Android; on the other, it also gives Microsoft a chance-however tiny-to convince smartphone manufacturers of the virtues of Windows Phone.

"The likes of Samsung, HTC and LG obviously don't have any other choice than to say at this point that they welcome the deal," Florian Mueller, an intellectual property analyst, wrote in an Aug. 15 posting on his blog. "But there's no way that they can compete with a Google-owned Motorola Mobility on a level playing field."

That might drive those players into the open arms of Microsoft. "This deal could throw [Microsoft's smartphone platform] a temporary life-line," John McCarthy, an analyst with Forrester, wrote in an Aug. 15 corporate blog posting. "Forrester can hear [Microsoft CEO Steve Ballmer] and company pitching the Asian players on how Microsoft is the only hardware agnostic player left and that HTC, Samsung, and LG should increase their support for [Microsoft smartphones] as protection against Google."

Indeed, soon after Google's announcement, Microsoft already seemed intent on playing that angle. "Investing in a broad and truly open mobile ecosystem is important for the industry and consumers alike, and Windows Phone is now the only platform that does so with equal opportunity for all partners," Andy Lees, president of Microsoft's Windows Phone Division, wrote in a widely circulated Aug. 15 statement.

The other big question is whether Motorola Mobility's 17,000 patents will give Android the cover it needs to repulse its rivals' intellectual-property lawsuits. For the past several months, Microsoft has pursued a particular strategy with regard to Android manufacturers: enter into a royalty agreement or face lawsuits. So far, a number of companies have taken the royalty option. However, Motorola was a notable holdout, more than willing to drag the dispute into courtrooms.

The Google acquisition might not prevent the case from breaking in Microsoft's favor. "If regulatory scrutiny delays the closing of the acquisition, Google could end up buying a company that is formally enjoined from importing Android-based devices into the United States," Mueller wrote in his posting. "In that kind of scenario, Google might come under pressure from its own shareholders to consider paying the huge $2.5 billion break-up fee." In addition, "such an outcome could also raise questions about the strength of [Motorola Mobility's] portfolio."

In other words, yet another battle for Microsoft to continue fighting-on top of everything else-over the next several months.

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Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.

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