Reuters
Motorola Mobility Holdings Inc. MMI +0.08% jumped nearly 56% to $38.12 a share, rallying after Google Inc. GOOG -0.09% said it would buy the cellphone manufacturing business for about $12.5 billion, or $40 a share. Shares of Google fell 1.2%.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Robert Cyran
NEW YORK, Aug 15 (Reuters Breakingviews) - Google is spending $12.5 billion on insurance for itself -- but its partners may not feel at ease. The search giant's deal to buy smartphone maker Motorola Mobility locks in patents to help protect its rapidly growing Android mobile operating system. But Google's plans for the hardware business that comes along with the patents will be the key concern for regulators and other current Android handset makers alike.
Intellectual property suddenly mattered to Google following the recent $4.5 billion purchase of 6,000 patents from the bankrupt Nortel by a consortium of Apple, Microsoft and several others. Google's much smaller hoard of patents left Android vulnerable. The risk was that rivals could extract increased royalties from the manufacture of Android devices -- or, worse, prevent companies selling them altogether.
Owning Motorola Mobility's 17,000 patents should insulate Android against this danger. Google paid up for this peace of mind with its biggest acquisition deal yet, at a whopping 63 percent premium to Friday's closing price.
Antitrust regulators may raise an eyebrow. They are mainly concerned that Google might use its Internet search dominance to gain an unfair advantage in, say, the provision of mobile services. But some might also worry that making hardware could give the company a different kind of edge. Motorola Mobility has only a small share of the fast-moving smartphone market, so the deal isn't likely to be blocked. But Google has agreed to pay its target a whopping $2.5 billion if the deal can't be consummated.
Other makers of Android handsets face greater discomfort, though several have publicly backed the deal. The likes of Samsung, HTC and LG always feared that cellphone production could replay computer market history, with hardware becoming a brutally low-margin business with software producers like Microsoft extracting the lion's share of profit. Now they face potential hardware competition from their software partner.
Assuming Google keeps Motorola Mobility's hardware operations going, it could one day be tempted to favor its own handsets -- perhaps hoping to reproduce Apple's roughly 30 percent operating margins. Google says it wants to keep Android open to others now and in the future, and gadget-making isn't its forte. But rival makers of Android-powered mobile devices may still seek insurance of their own, for example by keeping their options open with other operating systems, like Microsoft's, as well.
CONTEXT NEWS
-- Google said on Aug. 15 that it had agreed to buy Motorola Mobility for $12.5 billion, or $40 a share -- a 63 percent premium to the closing price on Aug. 12.
-- Motorola Mobility, which makes smartphones and related devices, will remain a licensee of Google's Android mobile operating system. Google said it will keep Android open to other hardware makers and run Motorola Mobility as a separate business.
-- Google statement: http://link.reuters.com/ryx23s
-- Reuters graphic: Top Google acquisitions http://r.reuters.com/gaz23s
((robert.cyran@thomsonreuters.com))
(Editing by Richard Beales and Emily Plucina
Reuters
reuters.com
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By Buying Motorola, Google Can Now Do Whatever The Heck They Want With Android
Greg Kumparak
posted 34 mins ago
10 Comments
Ball
With the announcement of their planned $12.5B Motorola Mobility acquisition this morning, Google is buying a lot of stuff. They’re buying 20,000 employees (almost doubling their headcount.) They’re buying an absurdly daunting armory of over 24,000 patents (I mean, come on: Motorola has the patent on the cell phone.) But there’s one more thing that Google’s buying, and it’s one that shifts up the Android game all together: nearly 30% of Android’s existing marketshare in the U.S.
After years of owning next to none of the hardware marketshare for their own software platform (even the so-called “Google phone” Nexus devices are made by HTC and Samsung), Google has just become Android’s 2nd biggest manufacturer.
At 29%, Googorola sits in the second place seat, just behind HTC (35%) and ahead of Samsung (25%). That stat comes from numbers pulled fresh this morning by mobile analytics firm Localytics.
Some of the things this could mean:
Updates For Everyone! Now under the Google umbrella, the pressure on Motorola to keep their Android handsets updated will be stronger than ever… which in turns ups the pressure for everyone else. If Motorola maintains their share and Google keeps a fire lit under them (as they should), nearly 30% of the devices flying off the shelves will be quickly upgraded to each new software release. Other manufacturers will feel the heat to support upgrades as often and as quickly possible, or risk being known as the manufacturer that doesnt.
The death of the skin? So far, any of the devices that Google has had a direct role in launching run what they call a “pure Google Experience” — that is, it’s Android, straight-up, without any of the custom interface replacements/overhauls that the manufacturers insist on strapping to their own Android devices. HTC has Sense. Sony Ericsson has UXP. Samsung has TouchWiz. Motorola had Motoblur.
Motorola recently announced that they would be tapering off the development of Motoblur, and now we know why. Google doesn’t want their own handset manufacturer changing up Android — that would imply that something is wrong with Android. While Moto might have one or two more devices in the pipeline with BLUR on deck, expect all of their new stuff to run vanilla Android sooner than later.
It’ll be interesting to see how this affects other manufacturer’s skinning efforts. Will they fall back to vanilla Android because that’s what most users will come to expect, or will they strengthen their UI tweaking efforts to differentiate their wares?
Google could tackle Android’s “fragmentation” by bullying for standard hardware specs Though they tend to be overblown, Android does have fragmentation issues. Among the most annoying, from a development/testing perspective, is the hugely varied selection of screen resolutions used by different manufacturers. How easy would it be for Googorola to say “So, hey guys, we’re only going to use 800×480 displays on our own devices for the next year or so. You don’t have to, but, you know, you probably should.”?
Google just instantly shot from zero to 60 (well, zero to 30% — but you get what I mean) in a race they long pretended to have no interest in. They stood aside and let the major manufacturers raise Android to the top — and now that it’s there, they’re swooping in and taking a commanding control of the hardware side of things. Is it evil? Perhaps a bit. But it’s also downright genius. Marketshare maintained, Google will have final say over what happens to thirty percent of the hardware sitting in pockets, and be able to sway the other manufacturers accordingly.
Expect Android to do nothing but improve, and fast.
Crunchbase
Company:
Website:
http://google.com
Launch Date:
7/9/1998
IPO:
25/8/2004, NASDAQ:GOOG
Google provides search and advertising services, which together aim to organize and monetize the world’s information. In addition to its dominant search engine, it offers a plethora of...
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Crunchbase
MOTOROLA
Company:
MOTOROLA
Website:
http://www.motorola.com
Launch Date:
1928
Motorola is a telecommunications company based in Schaumburg, Illinois. It is a manufacturer of wireless telephone handsets, also designing and selling wireless network infrastructure equipment such as cellular transmission...
Learn more
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Why Google had to have Motorola Mobility
The acquisition has provoked comment about defensive buying of patents, but Google surely has more ambition than that
Dan Gillmor
Dan Gillmor
guardian.co.uk, Tuesday 16 August 2011 20.40 BST
Google logo
Google's acquisition of Motorola Mobility gives it the potential to challenge the Apple iPhone with a proprietary handset running its Android operating system. Photograph: Walter Bieri/AP
For several years now, Google has been following a vow made by former CEO Eric Schmidt: mobile first. New CEO Larry Page is taking that dictum to a new level by announcing a deal to buy Motorola Mobility for $12.5bn.
The implications of this deal depend entirely on how Google plans to use Motorola. If, as some claim, the deal is more about obtaining Motorola's mobile patent portfolio than anything else, we can expect escalating patent warfare between technology giants and limited innovation beyond that. If, however, Google intends to operate the business it is acquiring, we may see some broad and sweeping changes in the technology industry.
If the deal is chiefly about obtaining Motorola's mobile patent portfolio, then Google would likely spin off the hardware end of the company and keep the software and patents. The patents would be vital weapons in its competition with Apple and Microsoft, as the two companies are using patent claims to try to slow the remarkable growth of Google's Android operating system, which has become the most widely used smartphone platform.
But assuming Google intends to operate the business it is purchasing – and also assuming, as seems probable, regulatory approval of the deal – the landscape for Google, and the technology industry more broadly, will change. Some of the implications are clear already.
Perhaps Google wants to be more like Apple, owning an entire ecosystem around Android. For all its success, Android has suffered from "feature balkanisation", as phone manufacturers and carriers have turned the open source system to their own aims.
Motorola knows how to make good hardware (though it's been outdone in that regard by Samsung and HTC in the Android market), and one can imagine some excellent devices – once Google controls the outcome, as it did with its initial Nexus One phone (made by HTC) and Nexus S (Samsung).
Such devices should include tablets, which have been a notably dry area so far for Google and its Android 3 "Honeycomb" operating system. To date, Android tablets, including Motorola's Xoom, have made very few inroads in an arena heavily dominated by Apple. That may change with an Amazon tablet this fall, but Google needs to create its own to showcase what is possible.
In the near term, it is difficult to imagine any competitor fully matching Apple's ability to marry hardware and software with elegance and ease of use. Where Google could beat Apple, however, is by being less controlling of users than Apple has become: one reason many people (including me) have chosen Android is a preference to make more of our own decisions about how we want our devices to work.
To the extent that Google uses Motorola to develop and launch superb devices, it will be competing directly with its partners. The company claims that the deal will not affect its relations with other Android handset makers, but that strikes me as fantasy. A cascade of happy talk in amusingly similar, supportive statements from Samsung, HTC, etc on Monday can't disguise the reality that they should be weighing their options with renewed urgency. I don't see why they should trust Google, at this point.
So, who should be happy about this deal? Microsoft, among others. The Google-Motorola deal gives the Windows mobile platform a renewed lease on life. Microsoft could now position itself as the only major operating system that is platform-agnostic. That neutrality is somewhat suspect given Microsoft's recent alliance with Nokia, which includes a major investment and all kinds of special treatment, but it will be in Microsoft's interest to be as neutral as possible in dealings with its mobile partners.
Another, less obvious dimension of this deal is that it may help Google make enormous strides in the television marketplace. Google has been trying, with limited success, to push Android into living rooms via Google TV. Given that Motorola makes set-top boxes, Google TV could become part of this market. But the other cable and satellite companies will have a lot to say about this – and they already consider Google a scary competitor, not a partner.
The most widely discussed element of the deal – the patents – highlights one of the technology industry's worst problems. As Chicago Public Radio's This American Life recently reported, America's patent system is highly dysfunctional. The United States Patent and Trademark Office (USPTO) routinely issues patents for "obvious non-inventions", many of which have already been invented. This enables patent "trolls" to extort settlements from companies allegedly violating those patents; this is, in effect, a tax on technology and a severe impediment to actual innovation. Meanwhile, several federal district courts – notably one in Texas – have become havens for the the patent trolls, further tilting the scales in favour of plaintiffs. And Congress, as usual, has refused to do its job. Among other acts of malfeasance, Congress has refused to give the USPTO the funding it needs to do the job properly, in part by appropriating the fees the agency collects from applicants in order to fund other programmes. A patent "reform" bill now under consideration and all too likely to become law would, by any reasonable analysis, make matters even worse.
To the extent that the Google-Motorola deal is defensive, a buying of weaponry in the ever-escalating patent warfare, it can hardly be called productive. But I hope it's about much more than that, namely Google's intention to push harder in the mobile arena to open it up to more competition.
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