Google surprised the phone industry recently by announcing that it had purchased Motorola’s smartphone and tablet business for $12 billion. Google’s CEO, Larry Page, said the purchase would “supercharge” its Android operating system and help the company extend into other business ventures.
But in reality, it’s very evident that all Google seeks is the control of over 17,000 patents owned by Motorola, which will help Google protect its Android operating system. This is the first time Google has owned a phone hardware business and is the largest investment the company has ever made, dwarfing its previous purchase of DoubleClick for $3.1 billion in 2007. Google announced its intent to acquire Motorola for $12.5 billion last August. The deal has won regulatory approval in the U.S. and in Europe, but has been dealt a delay by Chinese regulators.
The deal will put Google in direct competition with other smartphone manufacturers such as Apple and Blackberry. Mr Page said that the acquisition will be greatly beneficial to Google. Of course, this is considering the simmering relationship with Microsoft over patent suits meant to choke the Android platform. But the question is: what will Google do with Motorola’s world-spanning design and manufacturing facilities, not to mention its 20,000 employees. Does Google really want to be a company that makes actual, physical goods, or would it rather remain in the virtual realm?
After spending several weeks probing Google and Motorola for clues as to what the companies will do once Google finalizes its acquisition of Motorola, The Wall Street Journal’s Dennis Berman concludes that the answer is, well, inconclusive. Neither company is really sure how things are going to work out, at least with respect to Motorola’s smartphone business, once Google owns the ailing phone maker.
“With mobility increasingly taking centre stage in the computing revolution, the combination with Motorola is an extremely important step in Google’s continuing evolution” said Page. Android is used in nearly half of all smartphones and many major companies have gone to the courts claiming patent infringement.
Mr. Page said that gaining Motorola’s patent portfolio will “help protect Google from anticompetitive threats from Microsoft, Apple and other companies.” The acquisition of Mobility is a gamble. Google can now make their phones as good as Apple’s, but if rival manufacturers feel squeezed by Google, they may look for alternatives to the Android operating system.
The sticking point is that Google is the creator, distributor, and guardian of Android. Android is its wildly popular smartphone platform. Google gives away the base code of Android for free, and in return is allowed to install its goods and services on smartphones. Those smartphones, however, are manufactured by some 55 different companies, including Samsung, HTC, Sony Mobile, LG, Asus, and myriad others.
Google’s Andy Rubin has said earlier this year that Google will institute a “firewall’ between its Android and Motorola teams so there is no conflict of interest when it comes time for Google to provide code to other hardware makers.
Google can’t afford to tick off its hardware partners. With 850,000 Android handsets being activated daily around the world, it risks a huge opportunity if the ecosystem collapses. Even if Google can make its own Android smartphones via Motorola, it could never make up for the losses that would occur if other OEMs gave up on Android.
Therefore it seems more likely that Google may decide to collapse the Motorola mobile brand business so as not to directly compete with their hardware partners. If however it decides to continue the business, then there’s every likelihood of a sharp drop in their hold within the mobile and Tab sector in the near future, due to customer/market apathy. However, it’s hard to imagine the end of hello-Moto!