Wednesday, August 17, 2011

Motorola - Google deal: Facts and Truth

Google and smartphone vendor Motorola Mobility have entered an agreement where the search giant will acquire the mobile maker for $12.5 billion, formally announcing the beginning of Google’s official entry into the smartphone market as a vendor.

After the undoubted success of Android operating system, Larry Page, CEO of Google has announced that Google insists on updating the specific software and enter more dynamicly in the area of smartphones. For this reason they have deceded to reach an agreement with Motorola Mobility. Motorola has 80 years of innovation in communications, introducing the world’s first portable mobile phone over 30 years ago. The company was one of the founding members of the Open Handset Alliance, and was one of the first smartphone vendors to associate a definitive brand with the Android ecosystem via its Droid smartphones.

Page's exact words on Google blog are the following: 

This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences.
The combination of Google and Motorola will not only supercharge Android, but will also enhance competition and offer consumers accelerating innovation, greater choice, and wonderful user experiences. I am confident that these great experiences will create huge value for shareholders. 

Undoubtedly, Google has made a surprise attacking move in the field of competition. But what is the key factor that moved Google in deciding to taking over Motorola Mobility? A single word is enough: 'Patents'
Motorola Mobility possesses a great deal of patents in its portfolio. Such patents will provide support to Google regarding the further development of Android.

According to analyst Mayuresh Masurekar: We believe the key benefit of this acquisition to Google is Motorola Mobility’s large patent portfolio, with 17,000 patents and 7,500 more applications in progress. This portfolio should strengthen Google’s position in any lawsuits related to Android (such as the Oracle lawsuit), and protect the fast growing Android ecosystem. Nortel Network’s portfolio of 6,000 patents was recently sold to a consortium of companies for $4.5B. Assuming no significant difference in the quality/ effectiveness of patents, Motorola Mobility’s patent portfolio (3x bigger than Nortel) would have been worth 3x the $4.5B Nortel deal, implying Google paid the market rate for patents and obtained the manufacturing business for next to nothing. (source:

Google now posseses 19.000 more personel and will have to calculate an extra 157 million dollar income projected for 2011 and originating from Motorola. This move will surely trigger a 'war-like' response sequence for other companies. Do not be surprised if other companies (Microsoft-HTC for example) proceed to such moves as well. The sure thing is that the near future holds a lot of surprises for us.

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