Google has been attacked by many of its opponents lately. Apple and Microsoft have been ganging up against its Android device partners slapping them with patent infringement lawsuits, while Google was unable to do anything to defend them. Oracle and its infamous army of lawyers went up against Google itself, over the use of Java in Android. While Google seems likely to lose the lawsuit against Oracle, it has been trying to fight back against Apple and Microsoft. It tried to win the Nortel patent portfolio, but lost the auction against a consortium of Apple, Microsoft and others.
It was reportedly trying to buy InterDigital, which also has a large trove of patents related to wireless technology. Apple was also interested in InterDigital, if only to keep its patents away from Google. There were a few potential acquisition targets which made a lot of sense for Google. One of them was Motorola. Today, Google announced that it had bought Motorola for $12.5 billion, a 63% premium over its last closing price.
Here’s what the heads at Google and Motorola had to say:
Larry Page, CEO of Google, said, Motorola Mobility’s total commitment to Android has created a natural fit for our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.
Sanjay Jha, CEO of Motorola Mobility, said, This transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers, and partners around the world. We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses.
Andy Rubin, Senior Vice President of Mobile at Google, said, We expect that this combination will enable us to break new ground for the Android ecosystem. However, our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.
While the price is a bit high, Google didn’t have many other options. Additionally, the deal does make a lot of sense. Here’s why:
Patents, Patents & Patents!
If there is one thing that has been in the news in the last couple of months, it’s patent lawsuits. Almost everyone, from small patent trolls to large corporations, has been suing everyone else for patent infringement. Of the giants involved, Google was probably the most vulnerable one, with only a small number of patents in its portfolio.
With the Motorola acquisition, it has added more than 17,000 granted patents and 7,500 patent applications to its portfolio. Motorola is one of the oldest mobile companies and has a wide range of patents that can be used by Google for either defense or offence. I doubt that Apple or Microsoft would be able to bully Google or its friends now.
Straight from the horse’s mouth:
“We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to protect competition and innovation in the open source software communityand it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”
Hardware – Smartphones and Tablets
While the primary reason may have been patents, Google may have realized that Android probably wasn’t going to make it much money. With the Motorola acquisition, they can try to do it the Apple way. Tightly integrated software and hardware – a complete ecosystem of devices by Google. While it might piss off Samsung or HTC, it does make Google less dependent on its partners. Google will be able to offer a much better experience to users via optimized software running on its own hardware. It will also be able to offer quicker updates, at least on its own devices.
Additionally, Google’s purchase may force Microsoft to buy a mobile hardware company too, probably Nokia or RIM. Microsoft may realize that it needs a mobile hardware company as well, to compete with Google and Apple.
Motorola has a huge set top box business. Apple’s next big move may be in the TV business. Google has tried, but has largely failed to make a dent in the TV business. With Motorola, Google may gain a competitive advantage against Apple. After smartphones and tablets, the television industry is the next in line, ripe for some disruptive innovation. This buy could be Google’s perfect weapon against Apple and the incumbents in the TV business.
How It Could Backfire!
If Google has made the acquisition for patents alone, then I don’t see any major problems. HTC, Sony Ericsson and LG have already announced that they approve of the deal. But if the deal is about Google planning to bundle its own hardware with Android, Samsung, HTC, LG and others should be worried.
Google will obviously launch new Android versions on its own devices, unlike those of Samsung, HTC or other vendors. With Samsung and HTC being the largest Android phone manufacturers, Google is playing with fire. While Google’s move may be right, it can alienate and drive Samsung, HTC and LG right into the arms of Microsoft (Windows Phone 7).
However, Google has stated that Motorola will be run as a separate business, so I suppose Google’s primary focus is the patents, for now.
Wall Street seems to have taken news of the acquisition quite positively. There hasn’t been a significant drop in Google’s stock price. I suspect it might even move up.
Here are the official announcements: