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Google Didn't Want All of Motorola Mobility

Google (Nasdaq: GOOG) may be forming a strategy for Motorola Mobility LLC 's handset division and cable assets now, but it's growing more and more unlikely that the company had one when it first started courting Moto.

A preliminary special proxy statement filed by Motorola on Tuesday confirms that Google's original intent was to buy only the company's patent portfolio as Google looked to shore up its legal defenses for Android against Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT), BlackBerry and other competitors. (See Google Buying Moto Mobility for $12.5B .)

According to the filing, Google SVP of Mobile Andy Rubin started to discuss the idea with Moto Mobility CEO Sanjay Jha in July, but Motorola later fretted that "it could be problematic for Motorola Mobility to continue as a stand-alone entity if it sold a large portion of its patent portfolio."

Motorola was successful in getting Google to bite off all of Motorola Mobility instead. Google originally proposed to buy the company for $30 per share on Aug. 1, and following a series of negotiations, settled on the $40 per share that was announced in mid-August, the filing explains.

Moto also disclosed that it didn't try to shop itself to others, believing it was unlikely to attract a better price than what Google was offering. Plus, a failed attempt to sell "would be highly detrimental" to the company, Moto determined.

Motorola also kept Carl Icahn, the activist shareholder who had been pushing the company to consider strategic options for its wireless patents, apprised of how discussions were proceeding with Google. (See Moto Vs. Icahn 2: The Hunt for Patent Gold.)

Why this matters
The filing offers interesting reading on how rapidly the deal came together, but Google's apparent lack of interest in Moto's handset division and cable business will make everyone wonder what Google might do with those assets if it's successful in buying Motorola Mobility. Will it keep them and give it a go, or try to sell them off?

In the meantime, there's been much speculation about what Google might do with Moto's cable and video technology businesses, with some viewing the purchase as something that could help to reinvigorate the struggling Google TV platform, or give Google a straight path to cable MSOs and other pay-TV operators so it can push adoption of its Android OS in set-top boxes. (See Will Google Droid Up the Set-Top Box? )

For more
Get caught up on the Google-Motorola deal using our handy-dandy cover sheet.

— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 4:53:46 PM
re: Google Didn't Want All of Motorola Mobility

If Google didn't want Moto's cable assets to start with, it's possible that it won't want them later. So, if Google eventually tries to sell the set-top, CMTS and other cable assets who do you view as likely buyers?  I'll speculate some ideas on the blog and offer some odds, but interested in your thoughts. 


I'll toss one out there: Arris (they want to get into set-top box biz, but there's an awful lot of overlap between the companies), but they like to drive a hard bargain. JB

paolo.franzoi 12/5/2012 | 4:53:45 PM
re: Google Didn't Want All of Motorola Mobility

Jeff,


What about Huawei?  Maybe their chance to buy their way into some major US deployments.  I can not imagine there are a lot of companies that are capable are buying this large a business.


If there was an issue with Chinese Ownership, then this might make sense for Tellabs.  I would think Ciena or Genband could work as well, but I suspect they are really full up swallowing Nortel assets.


seven


 

AESerm 12/5/2012 | 4:53:44 PM
re: Google Didn't Want All of Motorola Mobility

Not being very original here, but Colin Dixon at TDG mentioned ARRIS and Ericsson in his 'bridge too far' note on 8/16. Trade show atmospherics: The booth that ARRIS launched in Chicago at NCTA and set up at the RAI (IBC) is an impressive 'home'; ERIC's IBC stand presented an impressive 360-degree view of content from creation to consumption. Both already touch the consumer but have similar gaps that MOT could fill.

paolo.franzoi 12/5/2012 | 4:53:44 PM
re: Google Didn't Want All of Motorola Mobility

I would assume that Arris would have DoJ challenges.  E is a possibility but I would think they would be more interested in growing wireless than CMTS and STB businesses.


seven

Jeff Baumgartner 12/5/2012 | 4:53:43 PM
re: Google Didn't Want All of Motorola Mobility

Huawei is a good one to toss in the mix, since they were rumored to be interested in Motorola back in 2009 before Motorola split itself in two. Back then, the belief was that Moto was looking to sell what was its home and netowrks mobility division for $4.5 billion.


Some other potential Mot suitors that were being theorized at the Telco TV show , which was going on back when that rumor was running wild included Microsoft, Ericsson, Cisco, and NSN.


Interestingly, no one speculated back then that Google might be interested.. and now we know why we were all right to assume that GOOG wasn't interested back then -- it evidently wasn't all that interested in that part of Mot's business even now, but that's what it's getting in this larger package deal it needed to pull together to get the patents it really wanted.


JB


 


 

Duh! 12/5/2012 | 4:53:43 PM
re: Google Didn't Want All of Motorola Mobility

As long as we're speculating, how about spinning those assets off to private equity.  Or an IPO.  Or, even wilder... are management led leveraged buyouts too much of an '80s thing to be a possibility?  I mean, if Frank Quattrone can come back...

Jeff Baumgartner 12/5/2012 | 4:53:42 PM
re: Google Didn't Want All of Motorola Mobility

Or maybe breaking Moto into piece parts may be the course here if Google doesn't want to live with the cable assets and has trouble spinning it off or selling to private equity.  Sell the cable access stuff to a company like Harmonic, where there's some but not complete product overlap,  and then sell the set-top unit to Huawei or Ericsson or Arris.  Moto has products that can fill gaps at other companies, but it's hard to see one company that would want or need all of Mot's cable assets and, to Seven's point, still afford to buy them.  JB

^Eagle^ 12/5/2012 | 4:53:40 PM
re: Google Didn't Want All of Motorola Mobility

Duh,


good idea, but an spin out or private equity purchase would be relatively valueless without those patents.


Moto understood this and sold the entire lot.  


if cable TV assets were to be sold off or spun out or otherwise, the relevant patents would have to come with.  


Not sure Google wants to give those up.


Same goes for the wireless hardware business.


sailboat

David Dines 12/5/2012 | 4:53:39 PM
re: Google Didn't Want All of Motorola Mobility

This filing indicates what some of us were hoping that Google did not think it could be a good hardware manufacturer. 


Interesting, Colin and I came up with the same basic conclusion around the same time (he beat me by 3 days, but i did not see his post until now - mine is at http://acgresearch.blogspot.co...


Time is of the essence, the longer Google takes to decide on what to do with the video assets the more uncertainty in the market and the more market share its competitors will gain.


I would not be too concerned about DoJ objections, Cisco is the main competitor in STBs and CMTS, so they would be presevering the competition there.  Any concerns about the QAM / HFC equipment could be addressed.


 


 

Jeff Baumgartner 12/5/2012 | 4:53:38 PM
re: Google Didn't Want All of Motorola Mobility

I think that's one of the reasons why some cable guys I talked to liked the idea of having Google and Motorola come together... Moto's been good at hardware, but considered lousy at software, which is something Google is very good at.  Of course, that idea won't amount to much if GOOG tries to turn and burn those cable assets, but I see some of the logic on why they can still make it a pretty good go of it beyond the real reason why Google wanted Moto in the first place. JB

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