Google’s blockbuster deal to acquire Motorola Mobility for $12.5 billion has set analysts, critics and industry observers on a tear predicting what might happen across the industry. But it was Apple’s stock price following the announcement that perhaps stirred the most speculation about what the future might look like for companies in the mobile space.
Following the announcement of Google acquiring Motorola Mobility, Apple’s shares gained on their Monday opening price. On Aug. 16, the shares were initially down, sparking some to wonder if investors are becoming gun shy by Google’s news. However, it seems that the dominant thought on both Wall Street and Main Street is that Apple will be totally unaffected by the deal. When it’s all said and done, the iPhone maker will still sit atop the mobile space with no real threat from Google or Motorola Mobility.
But that might not be the case. As powerful as Apple is, and as important as its iPhone and iPad are to the mobile space, the company will be affected by the acquisition.
Read on to find out why:
1. Motorola was on its heels
Motorola Mobility was doing a fine job of competing against Apple and all other competitors in the mobile space prior to the acquisition. The company’s line of Android phones were well-built, priced affordably and generally some of the better options for those who didn’t want an iPhone. Now that Motorola Mobility will have Google behind it what makes anyone think that its level of quality won’t only improve?
2. Google has the cash
One of the biggest issues with Motorola Mobility has been its inability to invest the kind of cash in its platforms that Apple has in the iPhone to keep competitors at bay. But now that Google will be putting its cash up to help Motorola Mobility, all bets are off. It shouldn’t surprise anyone if Motorola offers up some vastly improved devices featuring forward-thinking technologies that could put Apple on notice. It seems now that a spending war is sure to happen.
3. Consider the Android issue
Over the last few years, customers have grown increasingly fond of Android to the detriment of iOS, BlackBerry OS and other mobile platforms. Now that Motorola Mobility is on Google’s side, expect that issue to become even greater for Apple as consumers warm to the idea of having products designed and sold by Google. Make no mistake, Google’s brand means something in today’s marketplace and it could help improve Motorola sales and thus hurt sales of other products, including the iPhone.
4. Now two Android vendors are threats
It’s important to note that for the most part, Samsung was Apple’s only major threat in the mobile space. That company was nearing quarterly smartphone sales that matched Apple’s. But now that Motorola is working with Google there is a good chance consumers will buy more Motorola devices. Apple must now worry about the size and growth of two competitors. Simply put, Apple’s concerns in the mobile space just doubled.
Motorola Buyout Could Start Binge of Research and Development Spending
5. More consolidation will occur
One of the most likely effects of Google’s acquisition is further consolidation in the mobile space. Handset vendors might decide to merge to take on Google and Apple, while major firms, such as Microsoft, could gobble up other brands. Consolidation could prove troublesome for Apple. Right now, it’s faced with a host of small companies with limited cash to invest in new technologies. If many firms join forces to change the direction of the mobile space, Apple could have more trouble getting its message to its desired market.
6. Apple will need to try harder
Right now, Apple is able to coast. The company’s iPhone 4, which has been out more than a year, is still one of the most advanced products on the market, which means it might not even need to deliver a new iPhone anytime soon. But once Motorola Mobility is taking advantage of Google’s cash and scale, Apple will have to try harder to stay a step ahead. As Motorola develops more advanced products in the future the onus will be on Apple to keep up. That can only mean more capital expenditure and investment in research and development-two things that Apple likely doesn’t want to see go up in the coming years.
7. Will margins be affected?
Aside from features, it’s important to keep in mind that Google’s Motorola Mobility acquisition could have a negative impact on Apple’s margins. After all, if Google decides to beat the iPhone on price with products that have similar features, Apple will need to respond with better pricing, as well. In the process, the company could lose some of the profitability it currently enjoys.
8. Steve Jobs’ wrath
When Apple CEO Steve Jobs found out that Google was breaking into the mobile space, he was extremely displeased. Over time, the companies’ once friendly relationship has gone awry as Jobs continues to take issue with Google’s strategy. Now that the search giant has bought Motorola Mobility, how might he react? Chances are it won’t be too kindly. Expect Steve Jobs to privately and whenever possible publicly express his displeasure with Google’s move.
9. It means an iPad competitor is coming
The Motorola Xoom is by no means a competitor to the iPad 2. The device, which launched earlier this year, had a poor operating system in Android 3.0 and a price point that hindered it from gaining traction in the marketplace. Google is also having trouble getting its Android platform to catch on with tablet customers. But with the partnership between the companies now only months away from being completed, all that could change. Google could invest heavily in a Motorola tablet, and with the help of Android, finally deliver something worthwhile. Apple, while enjoying iPad 2 sales over that period, better be ready.
One of Google’s biggest problems has been its patent portfolio. The company itself has been sued by Oracle over alleged patent-infringement in the Android operating system, while its vendor partners have also been targeted. One of the companies targeting Android is Apple. But now that Google will have Motorola Mobility’s patent portfolio on its side, all this might change. It’s possible the “bogus” patent suits, as Google’s chief legal counsel, David Drummond, calls them, might come to an end.