Google’s acquisition of Motorola Mobility for $12.5 billion is larger than any that Microsoft, Apple, or other competitors in the same space ever have. Motorola Mobility(MMI) is comprised of two technology businesses – the mobile devices business and the home business as providers of digital set-top boxes and end-to-end video solutions. In January this year, Motorola, Inc. split into two businesses – Motorola Mobility and Motorola Solutions.
Google developed Android, an open-source operating system for mobile devices, in November 2007. Although, Apple’s iPhone is industry leader in the space, Android has seen phenomenal success in spite of challenges from other hardware and platform makers. As of now, over 150 million Android devices have been activated worldwide.
Although much is talked about the move to be about protecting Android, most people are ignoring the fact that Motorola is also a market leader in the home devices and video solutions business. Google have interests in the home entertainment space with Google TV and together they could accelerate innovation in this space.
Motorola has made good money, and CEO Sanjay Jha would be a happy man. With the huge cash reserve and the partnership with the premier software maker, Motorola can focus on building great products and services to revive the flagging business and mindshare amongst consumers. The Motorola split into Motorola Mobility and Motorola solutions couldn’t have been better timed, since Google would have little interest in the latter’s enterprise, government, and public safety infrastructure business.
Patents – Industry’s New Warfare
Motorola has a history of innovation in wireless and communications technology and products, and introduced the world’s first portable cell phone three decades ago. In the course of research and innovation through the years, Motorola has secured a huge patent portfolio.
With this acquisition, Google would gain 17,000 patents from Motorola. The number is huge considering that until recently; Google owned about 1000 patents only while their latest IBM deal over patents had doubled that pool to around 2000. Motorola has about 7500 patent applications in line in the mobility and wireless space. So, with this single buyout Google would inflate its patent portfolio over ten times, and close to what Microsoft has!
The Android Ecosystem
Google has clarified that Motorola Mobility, running as a separate business, will remain a licensee of Android and Android will remain open. Whatever is said though, the acquisition brings Google in direct competition with its partners. Handset makers like Samsung and HTC would worry if Motorola will receive early access to Android builds and build flagship devices for Android. Google recently annoyed partners by allowing Motorola to exclusively release the first Honeycomb tablet – Xoom. In the past, they have attempted an integrated strategy,similar to Apple’s business model, shooing the handset makers away with Google Nexus.
However, what would make them happy is the patent protection that Google has bought for them. Most handset makers and Google have been in patent spats with Microsoft and Apple and some like HTC are already paying Microsoft patent royalties on each Android device sold. Google had recently publicly alleged that Microsoft and Apple are joining hands against Google and its partners in an uncompetitive manner over patents.
With Google irking the hardware partners and patent royalties implying that android licensing is not effectively free, Samsung, HTC, and other handset makers might want give Microsoft’s Windows Phone platform added attention. Windows Phone is now the only platform provider that doesn’t compete against its partners for hardware sales. Microsoft might extend deals similar to the one it offered to Nokia for being a flagship partner while Microsoft supports development and marketing costs.
However, all that patents would slow down the patent royalty stream that Microsoft had worked out. Although, Microsoft’s patent portfolio is very strong, and it has already sued Motorola over few infringements. Google has walked itself into that spat with the acquisition.
This move also might just bring HP’s WebOS into greater focus. The platform has had big fans but the Palm-branded phones sunk without trace. If HP licenses WebOS to the big handset makers, there might be an alternative from the Microsoft-Nokia or Google-Motorola camp, as the handset makers would see.