With news on Monday that Google Inc. had made a $12.5 billion bid for Motorola Mobility, many posited the move was a play for patents to shore up the software giant’s Android operating system, though analysts remained decidedly divided.
“It would be a mistake to look at this as just (or primarily) a patent deal,” patent expert and founder of NoSoftwarePatents campaign Florian Müller told RCR Wireless News. “We’re looking at a deal that would fundamentally change Google’s Android-related business model.”
Forrester Research’s Charles Golvin, however, said the move was essentially a patent-strengthening one, with Google realizing it had brought “little to the table” historically in terms of patents, “forcing Android licensees to beef up their own portfolios in the legal derring-do.”
This “fend-for-yourself” attitude from Google, he said, had put Samsung Electronics Co. Ltd. and HTC Corp. in the difficult position of having to fight Apple Inc. and others over injunctions preventing the sale of certain Android devices, like Samsung’s Galaxy Tab 10.1 in Europe. This ultimately weakens Android and in turn, Google.
“Motorola’s rich collection of patents greatly strengthens Google’s position at the IPR table,” Golvin writes.
Indeed, it was Motorola that brought Android to the masses in the first place, starting with the original Droid smartphone in 2009 and continuing its rich legacy to launch the first Honeycomb-powered tablet, the Xoom, in early 2011.
Motorola Mobility spun off from Motorola, Inc. in January 2011 to become a separate entity focusing on tablets, handsets and other mobile devices. That entity alone apparently boasts 17,000 patents with another 7,500 filed and pending.
“Motorola is one of the pioneers of mobile phones, and along with Nokia and Ericsson it has one of the biggest and most profitable phone patent portfolios in the world,” IDC’s Francisco Jeronimo said, adding that Motorola also had “an important set-top box business, which will help the GoogleTV service to expand.”
With Motorola Mobility also a maker of Bluetooth headsets, cases and chargers, that also now makes Google a consumer electronics manufacturer, which according to IDC’s Golvin, “enables the company to craft experiences that provide continuity across multiple screens.”
By entering into the hardware business, however, “Google risks significantly weakening other OEMs’ commitment to the Android platform going forward,” Golvin said. Indeed, while Samsung, HTC and others have had to put on a brave face in public responding to the deal, it is unlikely they are thrilled about it in private.
“The likes of Samsung, HTC and LG obviously don’t have any other choice than to say at this point that they welcome the deal. They will continue to say that for some time,” Müller noted, adding, “But there’s no way that they can compete with a Google-owned Motorola Mobility on a level playing field.”
“Samsung, HTC, and Sony Ericsson may now look at other platforms as a way to diversify the risk of being so dependent on one platform,” said Jeronimo, adding that “increasing their Windows Phones portfolio may now be a need in the long term,” as Google evolves from its role as their main partner to main competitor.
Surely Google’s newfound patent protection will come in handy for its Android partners, however, we asked.
“Those other manufacturers would benefit from the deal if Google struck patent licensing deals that benefit Android device makers. But it’s far from certain that that’s what’s going to happen,” Müller responded.
“Patents are just one part of this transaction, and it could be a combination of Motorola owning patents in areas that Google is interested in, such as video codecs (where Google tries to establish WebM), and strength in sheer numbers.
“This deal doesn’t make all of Android’s patent issues go away overnight. There may be more deals. This deal is about patents only in part. There’s much more to it,” he added.
There is certainly much more to it in terms of staff, with Motorola Mobility currently counting some 19,000 employees to add to Google’s current 30,000 – an increase of around 60%.
The acquisition may also not be quite as costly as the $12.5 billion figure would initially indicate, as Motorola Mobility has $3 billion in cash sitting in the bank, making Google’s total outlay a much easier to swallow $9.5 billion. Considering Microsoft Corp. bought Skype for $8 billion, the Motorola Mobility deal suddenly doesn’t look so monstrous and analysts agree that Google will likely get its money’s worth.
“Google has ways to extract lots of value out of this deal, and I believe the price is reflective of hopes on Google’s side that this acquisition can further cement its dominant market position in search,” Müller told us.
The price also leaves little doubt about Android’s strategic importance to Google, and although the firm says it will operate Motorola Mobility as a separate unit for the time being, Müller said “the price Google agreed to pay is not reflective of the value of Motorola Mobility as a stand-alone business.” Instead, “that’s the kind of price paid by a strategic buyer who plans to use the acquisition target as leverage for its (Google’s) own core business.”
What does this mean for Google’s operating system going forward? Müller said it was “too early to tell whether it is going to be a good thing for Android at large.”
As for Apple, Müller said the move “probably won’t scare the living daylights” out of the firm “but it does have implications.”
