Google Buys Motorola: Word Around the Web

By Clint Boulton  |  Posted 2011-08-16

Google Buys Motorola: Word Around the Web

Google's (NASDAQ:GOOG) $12.5 billion blockbuster bid for Motorola (NYSE:MMI) has certainly spurred a lot of water cooler talk in the high-tech industry, with journalists, analysts and other pundits debating the ramifications of this merger.

The search-engine giant is positioning the deal as a way to help it defend its Android operating system against the rampant litigation Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) have unleashed on Android OEMs, such as Motorola, Samsung and HTC.  

Ironically, the move will also give Google Apple-like control over the entire smartphones stack, from design and production of hardware, to development of the Android platform and the various applications it builds for the OS.

One fringe benefit could be a boost to the Google TV Web television business that has been anything but booming, as the Android-based Google TV could be added to Motorola's set-top boxes.

Andy Rubin, Google senior vice president and Android creator, said he spoke to the top five OEMs and assured them Android would remain open source. Yet some believe the deal will also push Android OEMs to adopt Microsoft Windows Phone 7 or some other platform because they feel Motorola will get preferential treatment under the aegis of Google.

eWEEK has trolled the Web and pored over some emailed research notes for some of the pearls wisdom experts have been stringing since the deal was unveiled Aug. 15. Take a walk with us through some of our favorites, starting with how some experts think Android OEMs will or won't trust Google's latest plan to save Android from being sued to obsolescence.

"The Android platform is on its way to becoming the eventual leading OS in the smartphone market due to its wide OEM support," noted ABI Research's Kevin Burden. "Does the growing support change for Android now that Google will be in direct competition with its licensees? Will the likes of Samsung, Huawei or even HTC adjust their strategies by emphasizing a competing platform? How will it affect Android future development? Android innovation relies on the contributions of its licensees, does it all freeze while this settles, and how well can RIM and HP capitalize on this opportunity?"

Well, if OEMs go elsewhere, they will probably go to Windows Phone 7, as Nokia did before them. This would weaken Android market share, certainly opening the door for RIM and HP, as well as Microsoft.

"So where does this leave the Asian OEMs HTC, Samsung and LG? If Microsoft passes on the Nokia acquisition, this deal could throw Windows Mobile a temporary lifeline," wrote Forrester Research analyst John McCarthy. "Forrester can hear 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 Windows Mobile as protection against Google favoring its own hardware play."

Of course, not everyone feels this way. Gleacher & Co. analyst Stephen Patel, who feels getting Motorola will help level the intellectual property playing field in the mobile sector, noted:  

"We think some vendors that may have considered hedging their Android smartphone bets with a greater commitment to Windows Phone due to patent issues may now be less likely to do so. On the margin, we view this as a negative for the WP ecosystem."

Google-Motorola Bid Sparks Many Debates

As for the patently blatant patent play, others are curious: Why did Google opt to buy the whole Motorola Mobility enchilada? This Is My Next blogger Nilay Patel questioned why Google acquired all of Motorola instead of just its patent treasure trove:

"All that said, it's still curious why Google spent the full $12.5b on Motorola, instead of a smaller amount acquiring the rights to Moto's patents-or the rights to litigate with those patents."

We have a theory: Motorola CEO Sanjay Jha didn't give them a choice. By making Google buy Motorola at a 63 percent premium, Jha and the company's shareholders get a big win.

They get more money and protection from litigation, bundled with the ability to operate their core business, which is hanging on, independently. Motorola investor Carl Icahn can wax ecstatic.

How much did those patents cost Google? Jefferies & Co analyst Youssef Squali has an idea:

"We believe that Google is paying approximately $9.5B for MMI's patents, assuming $3B in value for MMI's home and devices businesses. This implies $560K per MMI patent vs. $700K that Apple/Microsoft consortium paid per Nortel patent."

Neither patent play came cheap. Speaking of the patents, FOSS Patents blogger and IP expert Florian Mueller doesn't see the Motorola patents as a major defense for current litigation versus Android, noting that Apple and Microsoft still sued Motorola despite its massive patent chest.

Looking to the future, the patents could provide good protection for Google, others believe. Sometimes the best defense is a good offense.

"From an intellectual property standpoint, the acquisition bolsters Google's negotiating position with Apple, in the event that Apple goes after Android-based products the same way it did with Samsung in Europe," said Francis Sideco, principal analyst, wireless communications, for IHS. "If nothing else, Google will be able to assert Motorola's IP for the 3GPP and 3GPP2 cell phone specifications, which are used in both the iPhone and iPad."

Lastly, what of the antitrust issues? When some people learned of the deal, they speculated the Federal Trade Commission and/or Justice Department would investigate it for antitrust issues. What antitrust issues?

"There are no antitrust or regulatory concerns that would constitute deal breakers," Stifel Nicolaus analyst Rebecca Arbogast said in a research note obtained by AllThingsDigital Aug. 15. "It would seem unlikely the deal would be blocked in the absence of any significant horizontal market concentration issues. We also don't see why the government would have a problem with Google arming itself in the smartphone intellectual property wars by gaining access to the 17,000+ patents Motorola brings to the battle-a primary Google objective."

What interesting tack are you seeing this story take during day two? Drop us a line in the comments section below.


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