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

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