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Mergers & acquisitions

Google Plays Favorites With Moto Buy

Google (Nasdaq: GOOG)'s US$12.5 billion acquisition of Motorola Mobility LLC puts its other handset partners in a precarious position. One the one hand, they get the patent protection they so desperately need, but, on the other, their open ally looks a little less impartial. (See Google Buying Moto Mobility for $12.5B , Google Slams Android Patent Attackers and Handset Makers Air Patent Grievances.)

Google stressed that it plans to run Moto as a separate business and keep it as an Android licensee. But that doesn't alter the fact that Google will be licensing its operating system to many handset makers, while also competing with them. It did this once when it created its own Nexus S smartphone, but its Moto acquisition takes this potentially detrimental balance to another level. (See Google Tries Unlocked Again With Nexus S.)

"We created [Google] as an open company and we plan to keep it that way," Google CEO Larry Page assured investors on a call Monday. Google and Moto were both founding partners of the Open Handset Alliance in 2007, but so were Samsung Corp. , High Tech Computer Corp. (HTC) (Taiwan: 2498), LG Electronics Inc. (London: LGLD; Korea: 6657.KS) and many others.

In the short term, all these OEMs are dependent on Android, as it drives most of their sales. But they could start to look elsewhere, such as to Microsoft Corp. (Nasdaq: MSFT)'s Windows Phone OS, if Google gives Moto preferential treatment. It's already done this once when it chose the vendor as its lead partner to launch the first Honeycomb tablet, the Xoom. (See CES 2011: Moto's 4G Gadgets Blur Lines.)

At a minimum, the acquisition strains the trust between the companies and their leading OS partner.

"It was born as an open platform," Google SVP of Mobile Andy Rubin reiterated on the call. "It doesn’t make sense for it to be a single OEM. We want to go with all our partners who helped make it what it is today."

On the plus side for Google's partners, it has gained a powerful weapon to defend against patent lawsuits. Besides its hardware business, Google will gain ownership of all of Motorola's 17,000-plus patents if the deal is approved. These are patents it could use to defend all of its Android licensees.

Rubin said that he spoke with five Android partners over the weekend that all showed "enthusiastic support" of the acquisition. He even got four to provide quotes to that effect, each lauding Google's commitment to "defending" Android.

"We think that'll benefit all partners in the Android ecosystem, including Motorola," Page concluded. "We're very excited about those opportunities going forward. It allows us to supercharge the entire ecosystem."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

DCITDave 12/5/2012 | 4:56:14 PM
re: Google Plays Favorites With Moto Buy

I think there was some worry on Google's part that Samsung was becoming the loudest voice in the Android ecosystem. And, let's be honest, the next big thing is not going to come from Moto. But if it suddently has a tight integration between software and hardware, the company's phones now become a more attractive option.

sarahthomas1011 12/5/2012 | 4:56:14 PM
re: Google Plays Favorites With Moto Buy

Those (nearly identical) CEO quotes in favor of the deal didn't seem genuine. I'm sure Google wrote them, but I'd be interested to hear what the other OEMs really think, especially Samsung, Android's biggest success story.

sarahthomas1011 12/5/2012 | 4:56:13 PM
re: Google Plays Favorites With Moto Buy

The next big thing could come from Motorola now. I bet it builds the next Nexus smartphone, which should be pretty powerful given the tight integration and Moto's LTE focus.  Should be good for the carriers too if they don't go the unlocked route.

krishanguru143 12/5/2012 | 4:56:11 PM
re: Google Plays Favorites With Moto Buy



Look at the follies Moto has made over the years.  They had the analog market but lost to the digital age because they thought they knew better than anyone else.  They refused to use a chipset from anyone but themselves and thought that 600mW was better than the standard at 200mW.  Their chipset delayed them for well over a year and people just were not buying Moto phones anymore.  When they finally did release their first digital phone, it was only picked up by one carrier.  All of the others, well, it failed the tests.  That one carrier that did sell it, pulled it because of all of the issues.  So they were late to the game and their last analog phones were junk as well.  Moto had a bug in their software and refused to accept that they did, no matter what the carriers proved.

 

Moto has been all over the map with no direction of any kind until Android came along.  Sure their Droid campaign is helping drive sales; the fact of the matter is, Android is Android and consumers have plenty of choices.  Android could fall from their current position at anytime.  The problem with being the top dog, you have a target on your back and the analysts that currently love Android will move along and bash it, no matter how many handsets are sold or what the sales growth is.  Moto has no diversity, they are 100% reliant on Android.




DCITDave 12/5/2012 | 4:56:11 PM
re: Google Plays Favorites With Moto Buy

They have been bad but they can be better. I do think Moto's Droid franchise is a solid family of devices with a potentially long future. Not the next big thing (that was the iPad), but definitely a contender.


ph

krishanguru143 12/5/2012 | 4:56:11 PM
re: Google Plays Favorites With Moto Buy



But Moto has always been one to disappoint hardware wise; both in features and in quality.  No matter how tightly integrated the hardware and the software can be, if the hardware is atrocious, does it really matter?

 

Did Android save Moto?  Yes, but they are still a far cry from where they were.  All Android did was put them on life support.  You even said it yourself, “And, let's be honest, the next big thing is not going to come from Moto.”




Parikshitandhare 12/5/2012 | 4:56:07 PM
re: Google Plays Favorites With Moto Buy

I think the battle for the "Complete" phone has just started. Till date only Apple had the "Complete" phone i.e. The OS as well as the hardware. Likes of Samsung, HTC and Moto relied on Android OS and Nokia on Win 7.


With Google buying Moto, I am sure they are not just focusing on the 17K patent value but also on challange iPhone with an equally good, if not better, phone in the near future. If the rumour mills are to considered, Microsoft might take a shot at buying Nokia and then again we have three big players - Apple, Google and Microsoft.


The battle has just gotten bloody.

jepovic 12/5/2012 | 4:56:04 PM
re: Google Plays Favorites With Moto Buy

Well, Nokia has made "complete" smartphones for years.


I just don't get how Google will combine openedness with special integration of Moto's HW. It's an oxymoron.


Another problem for Google is that smartphones are becoming increasingly similar, which means focus on brand and price/volumes (Android OS is part of that trend). Apple has the brand, Nokia the volumes, and the asians have the cost advantage. Motorola is stuck in the middle.


Finally, there's the fact that Google is a young company with no track record in buying and improving major corporations. AOL/TimeWarner springs to mind...

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