You don't spend $12.5 billion on a device maker for patents; You just buy the damn patents. (~_~)
I actually was far more bullish on Android's prospects before given the rapid device growth, the de facto stealing of Symbian's marketshare and the adoption of the platform as a basic and functional OS for most users. However, as a strategy I think this is quite flawed initially.
As a device maker, Motorola Mobility would be a good play for HTC or Samsung. They'd be integrating an established maker with contracts, devices, patents, etc. For the platform maker to outright buy them would immediately put most other makers on guard.
What guarantee do you have that Google won't favor Motorola? How do you know that they will keep things on an equal footing? You don't. Case in point: travel comparison on AdWords. Google has shown their willingness to integrate vertically and throw valued customers under the bus.
In the long run, it makes absolutely zero sense for Google to keep Motorola as "just another device maker" in the Android ecosystem. They most likely will give it lip service for a year, try and fight off some patent suits and then slowly integrate things much more tightly. I think they're betting that they can become another Apple in terms of integration with Android not being overly harmed by other vendors fleeing to Microsoft. It is the logical strategy - the one driven by reality, not some PR spin of being "open".
When Google bought Motorola, Android was under serious assault from patent trolling, and the move looked to most people to be mainly defensive to quickly build up a defensive warchest. It's my impression that Google never intended to become a serious competitor in the handset market, perhaps for fear of stepping on the toes of its partners like Samsung, so it was content to let Motorola operate as an independent entity as if Google were a holding company.
This is just my personal opinion with no more knowledge than anyone else, but this HTC acquisition looks different than Motorola. It has the hallmarks of an acqui-hire, and which implies Google may no longer be content to just sit by as a cornucopia of OEMs ship commodity HW using off the shelf stuff and small tweaks, as that's never going to pull the market forward like Apple can do with vertical integration.
Look, this is about patents more than anything, given that Google ended up not controlling all the patents it needs for Android (which was kind of dumb, but I digress). That directly impacts on Google's partners to build phones for the Android platform.
The bigger win in profit and power for Google is to have Android running on as many phones as possible (across multiple manufactures), and not turn this into a zero-sum game from the profits of Motorola alone.
Therefore my guess is Google has bought Motorola Mobile simply to keep the business running independently but to ensure the patents are not enforced against the other manufacturers and be able to leverage non-Android patents in the Moto portfolio to wrangle the Android ones it still needs. The value of all this, along with the profits of the business, are probably worth the $12bn price paid.
The whole reason Google bought Motorola in the first place was for the patents. They even said as much in [their blog post announcing the acquisition][1]:
> We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to “protect competition and innovation in the open source software community” and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.
They also were very careful to explain that they were _not_ buying Motorola in order to get into the hardware business:
> 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.
I doubt Google's reasons for acquiring HTC are the same in this case. If in fact this time they _are_ planning to use HTC to get into the hardware business (and that seems likely, given their efforts with the Pixel line recently) you should expect them to handle this acquisition in a completely different way from how they handled Motorola.
The interesting bit is that on the conference call they did say that that was actually not the plan (most likely to keep the other android partners comfortable). Supposedly their process for Android remains the same and Motorola will be on the same footing as everyone else when it comes to software access.
This says that the deal was 100% about patents and nothing else, which in turn says it wasn't that great of a deal in the first place (considering as they paid a big premium for the patent portfolio).
But assuming that they break their promise to partners and do what apple does too by designing both hardware and software together: it would be a good thing for Google as a phone maker, but a nail on the "Android as open" coffin. I don't think they'll be able to risk a move like this - angering their partners and probably breaking Android up -, which just means that the actual impact this will have on the quality of phones coming from Google and Android as a mobile OS is slim to none.
To be fair: HTC is already a manufacturer for Google-designed hardware, which Motorola never was. I've said it before that this acquisition is best understood in terms of vertical integration than technology. If Google believes the future Pixel line (and similar devices) are going to make decent money, then buying HTC makes sense even if they don't change the working relationship between the employees at all.
If there is one company I trust to not screw this up it's Google and I think they have a good shot at getting this right. I'm sure their partner companies are going to be a bit ansy to start but they all compete on hardware / price anyhow which this doesn't change. A few points that pop to mind:
A. They already had to compete with Motorola, so they haven't lost or gained a new competitor.
B. They don't pay for Android so Motorola hasn't gotten some new financial edge. Google just has to ensure that all companies still get source releases at the same time. What they do with them is up to them. (aside: I expect we will see MotoBlur disappear with some of its key features rolled into future Android releases)
C. This will allow Google to protect Android much better which is very beneficial to their bottom lines, especially if it keeps patent licensing costs off of their products.
D. Google just has to be sure they don't play favorites but from what I have seen up until now they have been good about that.
E. This may have just brought the competition for who gets to build the next Nexus to an end. (unless the next Nexus is already basically "done" at another partner company)
I think they can get this right... and now hopefully we can get a whole line of nice Motorola hardware with current Android and unlocked boot-loaders, etc. I might have to reconsider the Droid 3 again (more like Droid 4 one day, since 3 is already in the wild as is)
I have a hunch this is Motorola saying: "Hey Google! Nice shiny patents over here! Shame if you didn't buy them...". Given their existing Android bet, they don't have an incentive to hit the Android ecosystem with a new front in the patent war.
We are in the midst of the intellectual property Cold War, and it's fascinating to watch. If Google can use Motorola's patents to balance the power in patent suits and avoid $20/device in licensing fees... well, they're activating 550k devices per day, so that's $11M/day in savings. Roughly 3 years to break-even on that basis alone.
Google can use Motorola to force the issues that have plagued Android for a while. Motorola devices will probably become "pure Android" devices like the Nexus series, pushing carriers to abandon the crapware and carrier-specific UIs they're infatuated with.
Most people I know with Motorola Android devices say the build quality is for crap. I hope Google can improve this, but if not, I hope they can at least get the carriers to quit layering garbage on HTC's nice hardware.
If Google really bought Motorola for the patents alone, we should expect massive layoffs as they wind down the phone manufacturing business.
If, as many have speculated, Google actually wants to follow Apple into the integrated software/hardware market, then this is a bet-the-company decision that will either see Google mired in a failed merger on the scale of AOL/Time Warner, or if successful it will provide a growth engine for the next decade and badly-needed diversification.
I think it's pretty hard to look at this deal purely from a technical analysis perspective, since no one except a handful of senior staff at Google really know what the plan is.
I don't have a problem necessarily with what the article is trying to paint - Motorola acquisition, like many other complex decisions involving lot of factors, can go either way for Google. But that's not the interesting part.
To get at the likelihood of best case and worst case you can't put out the unknowns and assume each unknown is likely to have a bad outcome and then conclude with fear uncertainty and doubt.
One such unknown is credibility of Motorola's patents. Scratch Florian Mueller and MG doesn't know squat about this. No one but Google's lawyers do. In so far as Google's lawyers are not idiots in spending $12.5B on the patents without having some plan on utilizing/monetizing them AND Motorola has actually not lost a patent lawsuit against Microsoft or Apple _yet_ and/or they aren't paying royalties to them yet, it is premature to conclude that Motorola's patents won't go far enough. That's exactly what MG says is likely to be the case.
Then there is the bias, that makes MG again rely on something insubstantial and unverifiable - How the PR notes of various Android OEMs were worded. MG claims that makes the Android OEMs look disingenuous. Less professional, may be - but disingenuous? I don't think so. Patent royalties are a threat to the OEMs and they know it well. If Google could put a patent pool up that they start with 25000 patents and growing and it convinces other manufacturers to contribute to it under the OHA - it benefits the OEM immensely and they know it. What is the other alternative for the OEMs? Go Windows Phone 7? Nice idea but it hasn't made a dent yet and if it does they can be sure to pay what Microsoft damn well demands - including choking their own throats with exclusive licensing agreements. For the OEMs it is clearly in their best interest to go where Google wants them to go. And Motorola for them was always a competitor - that hasn't changed with the acquisition.
Here is another nonsensical thing - MG says Google will be forced to make Motorola design better phones/tablets and that will mean they play partial to Motorola. He ignores the fact that Google is all about more handsets running Android. And Motorola isn't even remotely capable of addressing even 1/3rd of the potential smartphone market worldwide - Google needs HTC/ZTE/Samsung to fill in. Badly. There is just no way Google will want to even try to screw over them. And the OEMs can always up their game and compete well with Motorola on hardware, software update frequency, price and features. That doesn't change. Bottom line? Little incentive for Google to screw over the OEMs and little to no new adverse impact of Motorola to the OEMs.
I wasn't expecting MG to write anything insightful but he asserted at the start of the article that he wasn't going to go all Dan Lyons and start opening his mouth to talk without understanding - so here.
If Microsoft was settling their patent dispute with Motorola and looking at a cross-licensing agreement, that is all the more reason for Google to buy them. Either Google gets a cross-licensing deal and gets the protection they want for the Android ecosystem (at least from Microsoft) or Google winds up with a patent portfolio that Microsoft has already decided is dangerous.
Buying a patent portfolio attached to a troubled hardware-maker is hazardous for a company like Google. But if Moto didn't make Android devices, this story would have no link to Android.
Maybe there is a wider story in that Android strategy hasn't been consistently good or effective. Mixed messages about what Google will do with Moto made OEMs nervous. Prior to Nexus 7, tablet marketing wasn't brilliant. But everyone should be so feckless as to bumble their way to 1 million+ activations per day.
I'm sorry but this is bullshit.. the obvious interpretation is that Google wanted the patents and ended up with a business line they weren't interested in. Leveraging it for PR the way they did was insincere at best, especially on such a short timeframe.
Also it's entirely unclear to me what the outcome might have been for Motorola as a whole, had Google not been having wet dreams about its patent portfolio. Perhaps you have some insight here that you're not sharing?
I hope you're right. But Google has certainly sold it to its Android partners as "we're going to use their patents to defend your crapware-ridden half-assed locked down handsets and then smother the hardware people with this wet pillow":
Exactly. Let's not forget that "Google bought Motorola for $12.5B, sold it for $2.9B, and called the deal ‘a success’", purely for Motorola's patent portfolio.
I don't think the acquisition of Motorola was for anything other than the patent portfolio.
In https://www.google.com/press/motorola/ , Google mentions Motorola Mobility (the mobile phone arm of Motorola), but I believe this is overshadowed by the overt statement about patents immediately afterward.
I am quite confident that this deal does not bring much changes to Android and related companies, because even tough Google bought Motorola Mobility, their commitment to the other device manufacturers (Samsung, HTC, LG...) will be as strong as ever. It's Google's goal to reach as many people as possible with their Android operating system, so they can sell ads and be the default/dominant search engine on the mobile platform.
I would even argue that, after the acquisition, they are going to take extra good care of their relations with Samsung and HTC. Also I'm quite positive that the executives of the before mentioned firms, who've already both been sued by Microsoft and Apple, welcome the acquisition at least in the short term, as it strengthens Android's position in the patent lawsuits. We must not forget that it's Android that made HTC and Samsung great in the smartphone business.
Androids (Google's+Motorolas) success, is HTC's, LG's and Samsung's success.
So from my point of view, all the above mentioned companies depend on each other, which is why I don't expect any big strategic moves/changes in the next few months/year on either side.
Its all about the patents. But not the ones you might think. Google has been accused of being short sighted in its acquisition of Motorola Mobility citing the lack of support Motorola's patents will provide against Oracle and Apple. It is true, Motorola’s patents are not going to change Google lawsuits against Oracle and Apple, but these lawsuits are not a large problem for Google. Oracle just had a key patent ruled invalid and the judge over the case is calling for Oracle to significantly reduce their damages claim against Google. And it will be extremely difficult for Apple to get a significant amount of money from any of its dozens of lawsuits relating to usability and user interface given the broad nature of Apple’s patents and the numerous similar patents issued to other organizations. But Google did not buy Motorola’s patents to defend against the current Oracle or Apple lawsuits.
Google will use Motorola’s patents to defend against the ongoing hushed patent bullying by Microsoft. Microsoft has been coercing Android phone manufactures to paying up to $15 per handset for “licensing fees” and so far hasn’t even taken anyone to court! Even if you assume that each major Android handset manufacturer negotiated Microsoft down to $5 per handset that could be $40 BILLION next year!
Motorola already announced that they want to go after other phone manufactures and that they have the patents to do it. Google’s acquisition also ensures “patent attacks” with Motorola’s patents will be contained to non-Android handset manufacturers. Motorola’s patents can provide a sort of deterrence against Microsoft and others (either in court or behind closed doors) from collecting these “licensing fees” in the future and prevent them from leeching off of Android’s success.
esr has foreseen this: "This morning came the news that Google has agreed to buy Motorola Mobile for $12 billion. I was half-asleep when A&D regular Jay Maynard phoned me with a heads-up, but not surprised for a second; as I told him, I’ve been expecting this for weeks."
"make no mistake: this purchase is all about Motorola’s patent portfolio. This is Google telling Apple and Microsoft and Oracle 'You want to play silly-buggers with junk patents? Bring it on; we’ll countersue you into oblivion.'"
esr envisions a rosy future for Android: "now that Google has shown it’s willing to fly cover for Android handset and tablet makers, likely there’ll be more of them signing on. This move will accelerate Android hardware down the price curve."
I actually was far more bullish on Android's prospects before given the rapid device growth, the de facto stealing of Symbian's marketshare and the adoption of the platform as a basic and functional OS for most users. However, as a strategy I think this is quite flawed initially.
As a device maker, Motorola Mobility would be a good play for HTC or Samsung. They'd be integrating an established maker with contracts, devices, patents, etc. For the platform maker to outright buy them would immediately put most other makers on guard.
What guarantee do you have that Google won't favor Motorola? How do you know that they will keep things on an equal footing? You don't. Case in point: travel comparison on AdWords. Google has shown their willingness to integrate vertically and throw valued customers under the bus.
In the long run, it makes absolutely zero sense for Google to keep Motorola as "just another device maker" in the Android ecosystem. They most likely will give it lip service for a year, try and fight off some patent suits and then slowly integrate things much more tightly. I think they're betting that they can become another Apple in terms of integration with Android not being overly harmed by other vendors fleeing to Microsoft. It is the logical strategy - the one driven by reality, not some PR spin of being "open".
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