Will Microsoft Attack Google's Motorola?

Microsoft is engaged in a bitter patent battle with Motorola Mobility over Android. Will Google's $12.1 billion acquisition of Motorola change that?

It seems the tech pundits were right: Within a day of Google announcing it would acquire handset-maker Motorola Mobility (and its extensive patent hoard) for $12.5 billion, Microsoft began its appeal to the search engine giant's other Android partners.

"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.

It almost certainly won't end there. Android adoption shows little sign of slowing down, while market share of Microsoft's Windows Phone continues its decline. In turn, that could pressure Microsoft to take ever-more drastic steps to revive its smartphone fortunes-including exploiting any rifts that develop between Android manufacturers and Google over Motorola Mobility's new role as the latter's subsidiary.

"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."

The question now is whether Motorola Mobility's 17,000 patents will give Google the cover it needs for Android 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 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."

Whether Motorola's patents will help Google slow or block Microsoft's Android strategy is a matter for further debate. "By purchasing Motorola Mobility, and becoming a hardware manufacturer itself, Google is putting itself in the sights of those filing lawsuits," Allen Nogee, research director for In-Stat, wrote in an Aug. 15 research note, "which will not only allow it to defend against those lawsuits directly, but will also likely reduce the number of lawsuits over time, since rivals may be less inclined to sue well-financed Google than some of its hardware partners."

Microsoft, he added, "has rarely gone after Google and instead sues Google's hardware partners."

But that could change.

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