Does it make sense for Google to spend $12.5 billion on Motorola? I can see only downsides to this deal:
- Google doesn’t know how to make and sell hardware or manage a company that does
- Handset makers that compete with Motorola (i.e., all handset makers other than Motorola!) will now be reluctant to adopt Android, a formerly neutral software product
- Hardware can be sourced from hardware companies as needed; if Google wanted its own handsets it could have had HTC, Samsung, Motorola, et al., build them for it. A contract to build a few million mobile phones would have cost a lot less than $12.5 billion.
I don’t get this one. If it is a smart deal for Google, why didn’t Microsoft buy Dell or Compaq a long time ago? What am I missing?
In a word … Patents.
Apple is on the warpath with its patent attacks against HTC in the US and Samsung in the EU. I think Google are trying to consolidate their position.
As the official blog says “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.” http://googleblog.blogspot.com/2011/08/supercharging-android-google-to-acquire.htmlhttp://googleblog.blogspot.com/2011/08/supercharging-android-google-to-acquire.html
Interestingly, I don’t think the threat is so much from Microsoft who reportedly make more out of Android licenses than they do out of Win Ph7.
I suspect that as Steve says, this is all patents. I suspect everything else in the company will be sold off – I don’t see why Google would want to compete with its handset manufacturing buddies.
Motorola had a very valuable patent portfolio both for handset design, and for underlying technology (for example, the royalty they paid to Qualcomm in early 2000s was heavily discounted) source Motorola had a recent crosslicense with RIM source.
Apple has to pay Nokia $8 per iphone for royalties source . If Google sells 40 million androids a year, you could see the savings possibly adding up in a multi-year period.
so, when I heard that google bought moot mobility, I wasn’t as surprised as when I woke up to NPR announcing that Barack Obama won the Nobel prize a few years ago.
Regarding patents, see This American Life episode on Patent Trolls:
http://www.thisamericanlife.org/radio-archives/episode/441/when-patents-attack
Moto has some 17,000 in patents:
http://marketplace.publicradio.org/display/web/2011/08/15/am-googles-shopping-spree-is-more-about-patents-than-phones/
— “This is a heck of a premium” said Lee Simpson, an analyst at Jefferies International in London. Motorola Mobility’s patents are “a good counterweight if Apple comes after Google.”
http://www.bloomberg.com/news/2011-08-15/google-agrees-to-acquisition-of-motorola-mobility-for-about-12-5-billion.html
As Steve said, it’s about patents. What better company to buy than the one that invented the cell phone?
What you are missing is that Sergei Brin is now in charge of Google as CEO. He is not Steve Jobs, he is not Bill Gates, he is not Larry Ellison. We have seen many berserk movements in the last months since Schmidt left as CEO of Google.
They closed many “open” projects (Google Labs?), forced all of us to use “+1” and Google+, and -as something pretty strange for a company with so many cash- they get crazy about monetizing. Now it’s time for Android.
Sorry, not Sergei but Larry Page.
1) Patents protection for Android
2) Reduced device fragmentation, as suddenly they own 30% of Android hardware market. They can force upgrade on all Motorola handheld, forcing other manufacturer such as HTC, Samsung to follow suit or be known as the brands whose phones aren’t running the latest OS.
3) Control most of the Android ecosystem. From a developer standpoint, the most annoying thing on Android is that there are dozens of screen resolutions and designing applications to work across the ecosystem is a challenge. Google can now say, that all Android phones released by Motorola in the next 18 months will feature 800×600 resolution or the like. All other manufacturers will follow suit.
Google now completely controls the future of Android, even though they only own 30% of the hardware.
It’s just the patents, everything else about the acquisition is negative for Google and Android. The other OEMs must be uncomfortable that Google owns one of their competitors and should start to look at Android alternatives. Moto is not even a major player in the smartphone market- sells a helluva lot of feature phones.
Google would have preferred to just buy the patents, or even just the right to litigate the patents. But after the Nortel fiasco Carl Icahn knew they were desperate, so he demanded outright purchase at a stiff premium. Google caved. Simple as that.
No one seems to be mentioning the elephant in the room with respect to this. Namely, Google currently has circa 30K employees. Motorola has circa 20K. So, from a headcount perspective, this is more like a merger. And the two cultures are *very* different.
For example, let’s say Motorola is kept as a separate entity and doesn’t try to adopt Google’s culture. How much jealously will there be of the famous Google perks?
On the other hand, let’s say they do treat Motorola folk as full fledged Googlers. Well, off hand, I’d guess maybe 10% of Motorola might make it through Google’s very competitive hiring process. Current Googlers will resent the watering down of the “Googler” brand.
Unless they go completely hands off ala Warren Buffett and the companies Berkshire Hathaway acquires, some number of Google managerment types are going to have to be reassigned to Motorola to run it/start the painful process of making it more Googley. Which’ll distract them from doing other things.
This isn’t an even few hundreds of folk startup that can be relatively easily absorbed. And given the severe differences in culture, I think trying to sync the two up is going to be very messy and very counter-productive for some time.