Google to buy Motorola Mobility for $12.5 Billion

[3GScottishUser]

After launching some own brand handsets Goole Inc has decided to invest $12.5 Billion to acquire the Mobile Phone and Tablet divison of Motorola. The move will give Google a dedicated hardware design, manufacturing and distribution company.

I expect the range to be increased to offer the Chrome netbook and Laptop products but Google will now be able to offer their own range of hardware featuring their Android OS for phones and Tablets.

Larry Page, CEO of Google said, "Motorola Mobility's total commitment to Android has created a natural fit for our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers."

Read more: http://www.theinquirer.net/inquirer/news/2101782/google-buys-motorola-mobility-usd125bn#ixzz1V6CRdWOe

Interesting move following HP's move on Palm and Nokia's alliance with Microsoft.

[DaveC]

A very interesting move. It will be interesting to see what Apple will make of it all, seeing that they have got the knives out for Android.
Also what will the likes of HTC and Samsung make of it now that Google will be responsible for both Hardware and Software.

[Ben]

Oh dear. Android's climb to the top looked unassailable. This casts real doubt on whether Android will remain the de facto smartphone operating system, and therefore the future monopoly it looked to be building on the new generation of mobile computing.

The Register suggests (http://www.theregister.co.uk/2011/08/15/google_buys_motorola_mobility_wtf/) OEMs will start diversifying their choice of OS immediately, though few have been stupid enough to throw their weight behind Google's Android 100% so far. Despite Microsoft's alliance with Nokia, that Nokia remains an independent company will keep Windows Phone 7 looking attractive - now more attractive than ever. Given the royalties Android vendors face, Windows Phone 7 could even be a cheaper alternative!

It's already said that Google will run Motorola as a separate entity, and, provided it isn't seen to get overwhelmingly preferential treatment when it comes to future Android releases, I don't think any partners, sorry, competitors of Google's will be driving stakes through little green robots any time soon. However, the minute other OEMs start to feel that Motorola is being given a significant market advantage will be the moment many of them say enough is enough.

I can see the patent appeal of buying Motorola, but this has to be about more than patents. Clearly Google saw a future for Android that it didn't like, and felt it could only assure a preferential fate by finally succumbing to buying a hardware manufacturer. Perhaps that envy of Apple's hardware-software intimacy finally got the better of them, as they watched the continued fragmentation of Android with horror.

I hope that the outcome of this will be positive, for almost everyone. Google was essentially buying the market by pimping Android out for free, banking on the future revenues of having a massive installed base taking up Google services and seeing Google ads. If OEMs think twice about leaning on Android and we get a more diverse mobile OS landscape as a result then it's a win for everyone. Except Google?

[3GScottishUser]

Can't see manufacturers dumping what has been the big IOS compeditor quickly. Sure Google will own Motorola but it will remain a separate division and Motorola is not likely to cause HTC, Samsung, LG or SE any sleep for some time. Being open source Android can already be tailored to the needs of different manufacturers offerings so the Google acquisition of Motorola changes little other than providing Google with a stake in a hardware manufacturer. Unlike Apple Motorola actually manufacture handsets themselves and they also design and manufacture some of the complex electronics so Google have bought a lot of expertise in mobile commuications.

Android has a following now, just as IOS does and many customers upgrade from one version of the OS to newer ones. Apps and e-mail etc are linked to registered user addresses so leaving Android not only makes for a new OS learning challenge but they loose the apps and mail settings they are have paid for and are familiar with. I think HTC, Samsung, LG & Co will take account of that. Samsung launched Bada which is also Linux based but they have done very little with it to date.

The free open source Android OS will continue to grow by virtue of the fact that it costs nothing to install on handsets and looks set to be the obvoius choice for developing markets where mobiles are being used for the Internet at price levels those of modest means can afford. How many million ZTE, Hauewi and other Chinese Android handsets will soon be flooding those markets and will those companies be bothered about Google competing with a Motorola product? I doubt it.

Have Google got it right? Have Nokia? Have Microsoft? Have Apple? - It's a fast moving maket sector and the sands are shifting with big gambles now being placed. If I knew which of those or what newcomer might dominate the sector I'd place a few quid in their stock but it's not that easy to predict. Who would have thought HTC would have become the world's No 3 smartphone maker three years ago? Who would have thought the worlds most popular mobile smartphone OS would have been developed by a search engine provider?

One thing is for sure.......Motorola are back in the running again after today and why not as they have been doing a pretty good job of reinventing themselves latey.

[Ben]

Being open source Android can already be tailored to the needs of different manufacturers offerings so the Google acquisition of Motorola changes little other than providing Google with a stake in a hardware manufacturer. Unlike Apple Motorola actually manufacture handsets themselves and they also design and manufacture some of the complex electronics so Google have bought a lot of expertise in mobile commuications.
Google have so far failed to open source their tablet efforts. Time will tell whether they manage to get their act together for upcoming Ice Cream Sandwich, supposed to merge the tablet and smartphone OSs. Google wont just have 'a stake in a hardware manufacturer', they'll own Motorola. Outright. It's unthinkable that Motorola wouldn't benefit from direct access to Android and therefore have a competitive advantage over other Android OEMs. Also, AFAIK, Moto manufacture their handsets in Taiwan and China like (almost?) everyone else does, so I'm not sure where you're coming from there.

Android has a following now, just as IOS does and many customers upgrade from one version of the OS to newer ones. Apps and e-mail etc are linked to registered user addresses so leaving Android not only makes for a new OS learning challenge but they loose the apps and mail settings they are have paid for and are familiar with. I think HTC, Samsung, LG & Co will take account of that. Samsung launched Bada which is also Linux based but they have done very little with it to date.
Yes, I'm sure Android OEMs already give close scrutiny to the fact that their customers are handed over to Google's services almost exclusively. They're going to love the thought of how easy it'll be for their customers to switch to Motorola and take all their data with them... but you're right, without such a powerful suite of apps the OEMs smartphones would be in the dust.

The free open source Android OS will continue to grow by virtue of the fact that it costs nothing to install on handsets and looks set to be the obvoius choice for developing markets where mobiles are being used for the Internet at price levels those of modest means can afford. How many million ZTE, Hauewi and other Chinese Android handsets will soon be flooding those markets and will those companies be bothered about Google competing with a Motorola product? I doubt it.
Is it free? Recent reports show that OEMs can end up paying more in royalties due to patent infringements than it'd cost them to license Windows Phone 7. How long will OEMs let uncertainty hang over them when they could license Windows Phone 7 and have sound legal footing and no surprise bills down the road?

[Ben]

MacRumors have a (typically) good post: http://www.macrumors.com/2011/08/15/google-supercharging-android-with-acquisition-of-motorola-mobility/

Basically it looks like the acquisition is primarily motivated by patents after all. One supposes many of the companies that 'threaten' Android due to their patent holdings already license patents from Motorola, meaning Google would now be on a much more even footing.

Edit: Oh, this is creepy. OEMs line up to praise Google's 'protection' of Android http://www.slashgear.com/htc-sony-ericsson-and-lg-praise-googles-17k-motorola-patent-grab-15171695/

[3GScottishUser]

Reading the various news reports other Android manufacturers seem to be broadly supportive of Google's move as it will help protect them from future patent issues on Android devices. Google can continue to promote their OS and keep the Android market growing by using patents owned my Motorola and the cost will be recouped by hardware sales of handsets and tablets.

Google will have to be careful having a foot in two camps as a manufacturer and a company promoting an OS. If Motorola gets preference on future Andorid developments that could be an issue but that is perhaps a long way off. Google may benefit from the experience of Motorola who design, maufacture and distribute their product line. Motorola still directly manufactures mobile phones in various countries in addition to having some models built by sub-contractors. Apple does not manufacture any of it's products prefering to have them made by Foxconn and other Chinese specialist makers. I'm not sure how significant this difference will be, but end to end control over the hardware and software on handsets might be significant.

What looks likely is that Motorola will occupy the high end for Android along with Samsung, LG, HTC and SE. Mid and lower range devices will continue to cater for developing market growth supplied by Hauwei, ZTE etc. Lately Motorola have had some very positive reviews of mobile and tablet releases and that probably helped in the decision process when Google went shopping for a hardware company to acquire. I bet HTC would have been the preffered target but they have done way too well as of late, mainly on the back of Android, and were probably a shade too expensive even for the mighty Google.

HTC, Samsung, SE and LG have a foot in more than one OS camp presently so they can all react to changes in demand trends and switch to produce the most compeditive product to compete with whatever hits the market. I'm sure Google are more than aware of this.

Will this move now speed up a Nokia purchace by Steve Balmer's Microsoft? I am guessing he will be running the numbers as I type and will be awaiting the reception of Nokia's first Windows 7 mobile models before making his decision. If Nokia make a decent attempt I expect them to be swallowed pretty swiftly.

[Ben]

I see no reason why Google would want HTC. In fact, I don't think they want a manufacturer at all. They want patents, and as one of the original mobile phone makers Motorola has them.

The Register has an interesting analysis largely laying waste to claims that the purchase of Motorola gives them any significant protection at all: http://www.theregister.co.uk/2011/08/15/google_motorola_the_poker_chip_that_cant_be_redeem ed/

As the article says, Nokia are thought to have a stronger patent collection for mobile than Motorola do. Yet it only cost Apple a few hundred million to settle with Nokia in the end. None of the patents are going to be about interface or Java, which is where Apple and Oracle are hurting Android currently.

If Google really doesn't care about Motorola as a handset business, and the gushing enthusiasm from Android OEMs would appear to support this assumption, then loss-making Motorola has few prospects for the future. Likely it will be cleansed of many staff and probably most of its product line to cut costs, and endure as a producer of future if infrequent Google flagship/development devices.

[Hands0n]

I reckon that all of the analyses so far will bear fruit in one form or another and to a greater or lesser degree. Certainly, the Google acquisition of Motorola will represent all of them.

With the Motorola acquisition Google can assure themselves of at least one thing - and that is to get a firm grip on fragmentation of their OS. When I look at Android and iOs side by side the disruption that fragmentation has caused is dreadful. And the customer experience is none too good either. For all of Android's plusses one of the most significant negatives is that of OS updates being available for some but not all. Yet look across to iOS and you find that the updates are available planet-wide on the day of release to all of the supported devices. Naturally the older devices churn off the version list eventually, entirely reasonable. And so for at least one brand Google will be able to keep the OS in trim and may cause manufacturers and networks to reduce the amount of fragmentation.

Patents are an interesting matter. While Motorola is one of the original cellular mobile manufacturers their patents are also correspondingly old. Unlike Nokia dear old Motorola's history is chequered, at least in terms of their handset business. That part of the firm nearly went to the wall until Android breathed a new lease of life into the firm. And they have done well with it to date. Google's acquisition will indeed earn them a load of patents, and it may well be that there will be sufficient in number for Google to encourage the competition to back off. In the Cold War the multilateral nuclear armament assured that no one nation wiped out others. So perhaps in patent terms this can be seen in a similar light. If everyone pushed the button MAD would be the outcome. I don't think it will have much bearing on the patent troll firms. But one can hope that legislation will make life unprofitable for them in due course.

I do believe that the Google acquisition of Motorola will be a good thing in the short to medium term. That is, by this time in 2012 we should see the fruits of the buy out.

[gorilla]

I'm not sure about this. I don't generally like Motorola hardware and the xoom doesn't seem to be a very good tablet. I don't think HTC or Samsung will be particularly worried as long as they get updated versions of Android (eventually) - it's not like they're putting out the latest OS to their customers quickly anyway.

I really can't see Google making the move into the hardware business. I think that would be a really risky move. Their whole business is built around freemium and making profit on hardware like Apple is very difficult i.e. get a hardcore fan base and charge them loads! Android and google search are built on delivering a product to the masses as cheap as possible. What benefit is there to google by annoying their existing hardware partners? Just think if HTC used bing as the default search in all it's handsets - that would hurt google more than HTC dropping Android.

[DBMandrake]

I'm still sitting here scratching my head over this acquisition, I can't help but feel that it's a knee-jerk defensive reaction in response to patents that Google hasn't really thought through carefully. Do they really want a hardware manufacturer ?

Remember Ebay's puzzling purchase of Skype a few years ago that didn't really seem to fit their business ? Yeah, that worked out well didn't it... :D I think this could be Google's version of Ebay's Skype purchase...

[jokiin]

Remember Ebay's puzzling purchase of Skype a few years ago that didn't really seem to fit their business ? Yeah, that worked out well didn't it... :D I think this could be Google's version of Ebay's Skype purchase...

purchased for 2.6 billion, sold six years later for 8.5 billion, I think they'll live with themselves for that ;)

I suspect the Google/Motorola deal is more strategic than that though, Google have just been a supplier of software to a bunch of manufacturers and no real control over their destiny, becoming a hardware supplier that has relationships with telcos throughout the world is I would think what they are more interested in rather than some burning desire to make handsets

[DBMandrake]

purchased for 2.6 billion, sold six years later for 8.5 billion, I think they'll live with themselves for that ;)

By an unusual set of circumstances they did manage to sell it for more than they paid, (and more than it was worth) yes, but in the time they had it it was a huge loss centre, which was the main reason they sold it off again. Over the period they had it I'm pretty sure it lost them money over all, and the integration with Ebay services that they intended to implement never panned out, so in both those senses the acquisition was a failure, with them being very lucky to get such a good sale price.



I suspect the Google/Motorola deal is more strategic than that though, Google have just been a supplier of software to a bunch of manufacturers and no real control over their destiny, becoming a hardware supplier that has relationships with telcos throughout the world is I would think what they are more interested in rather than some burning desire to make handsets

I just came across an interesting analysis at Daring Fireball that suggests that it may have actually been Motorola pulling the strings in the Google acquisition - more or less forcing Google's hand. It's an interesting take on the situation:

http://daringfireball.net/2011/08/balls

[Ben]

From the above link, I massively agree with this:

I think Motorola knew they had Google by the balls. Google needed Motorola’s patent library to defend Android as a whole, Motorola knew it, and they made Google pay and pay handsomely. I don’t think it’s curious at all why Google didn’t simply license Motorola’s patents. Motorola held out for a full acquisition at a premium far above the company’s actual value, and threatened to go after its sibling Android partners if Google didn’t acquiesce. Thus the public threats from Jha and Icahn. Thus the high price. Thus the lack of a simpler, cheaper licensing agreement. Thus the unusual $2.5 billion reverse breakup fee.

That’s not to say it wasn’t a bold, brash move, or even to say it wasn’t the right move for Google and for Android as a platform. But that’s all relative to the position Google was in — and that position was a weak one, and to pretend otherwise is to deny the obvious. And don’t forget that it leaves Google in a tenuous situation with the two leading Android handset makers, Samsung and HTC. I think Apple and Microsoft probably feel pretty good, competitively, about having forced Google into spending $12.5 billion for Motorola — a handset maker with rapidly declining sales, no recent profits, and misguided management.
It's a very bizarre marriage and I can't believe for a second that this forms any sort of great Google plan. Where this all ends is anybody's guess.

Here's the GSMA's latest reporting:

Google’s planned acquisition of Motorola has created numerous aftershocks across the mobile industry, sparking debate into how the deal will change relationships among the various participants in the ecosystem.

The Financial Times (FT) reports that Nokia, which adopted Microsoft’s Windows Phone as its smartphone platform of choice earlier this year, said the deal “could prove to be a massive catalyst for the Windows Phone ecosystem.” There was some speculation that the deal could see Nokia become more attractive as a target, with an analyst with Nordea Bank telling Bloomberg that in comparison with Motorola, “there is quite a bit more on the table and yet there is little difference between the valuations of the two companies.” However, with Microsoft widely seen as the most likely acquirer of Nokia, it was noted that the companies already have a strong partnership and that Microsoft has significant patent holdings of its own – making an acquisition less likely.

It was suggested that Samsung, HTC and LG Electronics, which have already offered smartphones powered by the Microsoft platform alongside Android devices, may choose to review their strategies once Google begins competing with them directly via its Motorola arm. These companies will also be watching closely to see if Motorola gets preferential access to new Android releases or technologies, which would create an uneven playing field in the Android handset market.

The FT had a comment from Samsung, which noted that: “the news is so sudden that we are still studying its implications ... but we are not viewing it so negatively.” Bloomberg reports that HTC has also been positive, and that Google strengthening its mobile patent portfolio will be “beneficial for the whole [Android] group, the whole camp.”

Patent holding company InterDigital saw its share price fall by more than 10 percent, after its value soared on previous speculation that Google was considering an acquisition of this business. With Google not only having bolstered its patent armoury through its Motorola buy, but also having the US$12.5 billion acquisition of a mobile phone vendor to manage, its appetite for further deals may be dampened. However, there is also the possibility that one of Google’s rivals will look to InterDigital for a deal, in order to strengthen their position against the combined Google/Motorola business.

The Wall Street Journal suggested that any disruption among the Android community could work in RIM’s favour, by providing the BlackBerry maker with “much needed time to bolster its own handset offerings.” RIM could also become a potential acquisition target for bigger players “looking to grab patents or RIM’s corporate-heavy customer base.”

According to GigaOM, Motorola had previously held talks with Microsoft about a deal, with the computing giant seeing the handset maker’s intellectual property portfolio as a tool that would allow it to “torpedo Android even further.” This brought Google to the table, with the advantage that it also showed more interest in the company’s handset business than Microsoft.