Google has made the extremely surprising decision toacquire Motorola Mobility for a whopping $12.5 billion in cash. The deal marks a 63 percent premium on Motorola Mobility’s stock price at the end of the day on Friday, and means that for the foreseeable future, Apple and Google will be locking horns even more than many thought they would.
Although Google will need to suffer through the long and arduous regulatory approval process, the company plans to close the deal by the end of this year or early next year. When it does, it will finally be able to implement its strategy for capitalizing on what some investors might believe is a huge sum for a company that might or might not deliver a worthwhile return.
Regardless, Google’s acquisition of Motorola Mobility is already sending shockwaves throughout the mobile space. The buyout, if approved, will likely change the shape of the mobile industry in a number of unforeseen ways.
Read through the following items to find out what could result from Google’s decision to acquire Motorola Mobility.
1. Real Google phones
The Nexus One and the Nexus S might be branded with Google’s logo, but they aren’t really made by the company. Now with Motorola’s help, the search giant can fully control the design and marketing of its own branded phones. Does that mean an iPhone killer is on the way? It’s probably too early to tell. But consideringMotorola was already doing a fine job of offering smartphones and it will soon have Google’s cash coffers on its side, it might just deliver even more innovative devices in the coming months.
2. Serious concern from Android vendors
By acquiring Motorola, Google has potentially hurt its relationships with other vendors. After all, prior to the acquisition, Google was simply providing software. But now that it’s in the hardware business, the same company that’s offering vendors such as Samsung and HTC mobile operating system software is now competing with them. That’s not necessarily a good thing for most companies, and it could shake up how smartphone OEMs support Android in the future.
3. Trouble for Apple
There’s little question thatGoogle’s Motorola Mobility acquisition is bad news for Apple. Prior to the announcement, Apple didn’t have a single competitor with the size and influence needed to take down its iPhone. But now that Google has made a bid for Motorola, Apple potentially faces a competitor with the scale to seriously challenge its position in the smartphone market. Some might be happy to see Apple face stronger competition. But rest assured that Apple is not one of them.
4. An eventual end to the Motorola name
For now, Google and Motorola Mobility are saying they will operate the handset maker as an independent entity. And over the short term, one can expect Motorola to continue offering devices under its own name. But over time, expect that to end. Google will want to use its own branding on new handsets because of its broader brand appeal. What’s more, the search giant won’t want its devices confused with Motorola Solutions, the company that Motorola Mobility was spun off from. Simply put, it’s time to say good-bye to Motorola’s branding.
Motorola Buyout May Open Gates to More OEM Consolidation
5. An opening for Microsoft
Could this be the opening Microsoft needs? It’s certainly possible. As mentioned, Android vendors likely aren’t too pleased with Google’s decision. They might look elsewhere for an operating system for their top devices so they won’t be in competition with Google for sales of Android mobile devices. Logically, the only place they would go is to the open arms of Microsoft and its Windows Phone 7 platform. Believe it or not, this might actually be good for Microsoft.
6. A shift in vendor share
Right now, Samsung is largely dominating the Android ecosystem, thanks to the popularity of its many smartphones, including the Galaxy S II. However, with Google’s branding and cash behind it, expect Motorola’s phones to start picking up market share quite quickly in the coming months and years to compete with Apple. Things are changing in the smartphone OEM market.
7. Consolidation in the smartphone space
With Google and Motorola combining forces, it might not be long before other handset makers, out of a sheer desire to not be trounced by huge competitors, start to merge. HTC might find a friend in, say, LG’s mobile business. RIM might also find a company to merge with. At this point, it would appear that further consolidation is inevitable.
8. A major Microsoft acquisition?
With the potential for future consolidation in mind, it’s entirely possible that Microsoft will acquire a handset vendor to keep up with Google. After all, Microsoft views Google-not Apple-as its chief competitor in the mobile space, and acquiring a vendor to offer a similar solution might make the most sense for the company right now. Recent rumors have suggested that RIM might be a potential acquisition target for Microsoft. Will that happen now? For RIM, it’s a prime opportunity and for Microsoft it might just be a necessity.
9. Google tablets
The biggest issue for Google right now is that its Android platform has not gained much traction in the tablet space. With the help of Motorola, the search company might be able to change its luck. Sure,the Motorola Xoom didn’t catch on, but now that the vendor has Google’s cash behind it, the possibilities of improving upon that are endless. Expect a Google tablet refresh in short order that might just be able to take on Apple’s iPad.
10. Serious regulatory scrutiny
Although Google says that the deal will be approved by regulatory agencies by the beginning of next year, that’s not immediately apparent.Google has come under increased scrutiny as of late for its dominance in several markets. Its issues with privacy are still on the minds of lawmakers. Given Google’s influence across the industry and its already dominant market share, expect serious regulatory scrutiny to be paid to this acquisition.