Motorola would be the top winner in our opinion. The $12.5 billion figure is a 63 percent premium over the company's share price. Motorola has been struggling to keep up with Samsung and HTC in Android handset innovation. The company enjoyed fine Motorola Droid and Droid X launches, but has lost some luster after the Motorola Xoom didn't sell well and saw its 4G model delayed. The Droid Bionic 4G smartphone was also delayed. Getting Google to pay that price for patents and phones is a magical feat. At the least, it shows CEO Sanjay Jha's ability to capitalize on a company desperate for patent protection.
This may seem silly, and it's not as if as Motorola goes, Carl Icahn goes, but this man has an 11 percent stake in Motorola Mobility. The $12.5 billion acquisition price gives him a $1.34 billion stake in the deal. This didn't just fall in his lap. Icahn openly agitated for Motorola to do something with its patents, adding that they were undervalued. Now a handsome value has been placed on them. Charlie Sheen has a word to describe that—"winning."
Assuming Google jumps through all of the legal hoops with Oracle and comes through with Android relatively intact; assuming no smoking guns pop up to impede Android development; and assuming Google lets Motorola run independently, Motorola's patents will provide a big boon to the company's platform. Rivals will be more hesitant to sue Google, which will also own the hardware on which to test new flavors of Android. We won't say all future Nexus "pure Google" phones will be Motorola-made, but it will certainly give Motorola a leg up. Google will also gain the respect and power that comes with being a completely integrated stack player with the leading mobile OS. Finally, Google will have its own hardware on which to put Google TV, which needs a boost from someone, some way.
Yes, Samsung gets patent protection from Google, but with Motorola and Google so close, it's hard to believe Google won't afford its wholly owned phone maker some advantages. This may make Samsung's mobile development team less motivated to work their tails off to keep making what many in the industry understand as the best Android phones. Samsung certainly makes the best Android phone displays. Samsung could be a loser here.
We feel similarly about HTC, which has really come out of nowhere to be a dominant Android phone maker in the last three years since launching the seminal G1 and myTouch Android handsets on T-Mobile. We'll add another con to a consummated Googleola deal for Samsung, HTC and scores of other Android OEMS—Sony, LG, ZTE, Huawei in phones and tablets, as well as Toshiba, Acer, Asus and others in tablets. The bottom line is that Android would hardly be seen as the neutral Swiss playland for open-source mobility. Not with Motorola in Google's pocket. Any perceived favoritism will force some of these OEMs into the arms of another.
We mentioned Google and Motorola Android slights could push OEMs to pursue other platforms. Well, Microsoft, with its Windows Phone 7 would be the clear winner in this case. Imagine Samsung, HTC, Sony and others turning their attention toward WP7 defensive reaction to the Google-Motorola deal. Along with Nokia, Windows Phone 7 could possibly turn the tables on Android. Why not? The NoDo Windows Phone 7 software we tested was very solid and smooth.
Similarly, a Google acquisition of Motorola will be good for Apple, which owns the No. 2 smartphone platform in iOS. Just as Microsoft will benefit, we see Apple capitalizing on the fact that there potentially will be fewer Android handset providers out there. While Android handset makers might drift away from Android, Apple, along with Microsoft, could eat up some of the OEM crumbs that fall from the Android table. Apple would do well to capitalize on any additional FUD with the iPhone 5 coming out this fall.
"This is a shot for RIM to be No. 3" in smartphones after Apple and Google," Shaw Wu, an analyst at Sterne Agee, told the Wall Street Journal. We don't see RIM benefitting here. We see them losing. Here's why: People aren't buying RIM because the companys handsets are seen as old hat. We can't assume the QNX phones will arrive in time to save RIM's fading star. As great as an ecosystem of 5 or more mobile platforms would be for consumer choice, we see Android, iOS and Windows Phone 7 as the leaders in the smartphone sweepstakes.
Ditto for HP. We just don't see room for another integrated hardware platform player in the market. People are over Palm, and HP is not exactly a known quantity in mobile consumer devices outside of Windows-based laptops. If RIM can't benefit, we don't see how HP, which is focusing more marketing on the TouchPad than it is new webOS phones, can gain traction in the market. They are losing in this gambit.
Bear with us here. DOJ and FTC lawyers are likely huddled in a Capitol Hill tavern bar corner somewhere, arguing through clenched teeth over who is going to investigate this bid. The FTC is already investigating Google for anticompetitive behavior in search. Supposedly, the FTC is also looking at Google's behavior in mobile with Android OEMs. Weve already noted that this piece assumes at least one of these two agencies will approve the bid. Let's assume the FTC passes the deal. After all, it's a vertical acquisition, not a horizontal play; it's not as if Google is buying another search engine. The regulator is going to make enemies and cant help but make a lot of people unhappy if it approves the deal because it will disrupt the power balance in Android considerably. There's no winning in this one.