3 Comments

Summary:

How about that for some big news on a Monday morning? The $12.5 billion deal for Motorola Mobility has huge implications across the mobile and living room markets and could signal a stronger position for Android as it fends off patent infringement claims from Google rivals.

Screen shot 2011-08-15 at 9.02.42 AM

How about that for some big news on a Monday morning? The $12.5 billion deal for Motorola Mobility  by Google has huge implications across the mobile and living room markets and could signal a stronger position for Android as it fends off patent infringement claims from Google rivals. Google gets a lot out of the deal including 17,000 patents and the chance to build some innovative handsets and living room devices that push Android further than it’s gone before.

But it also could be inviting some trouble if Android manufacturers grow antsy competing against the platform owner. And it also means that Google has just added 19,000 employees to its current base of 29,000, a huge leap in one fell swoop.

Here’s a look at what some are saying about the deal and its implications today:

All of the big Android manufacturers chimed in their almost identical support for the deal, which means they either believe Google’s claim that this is about providing broad protection for Android or they really have no choice but to show support to Google. Said J.K. Shin, President of Samsung’s Mobile Communications Division:

We welcome today’s news, which demonstrates Google’s deep commitment to defending Android, its partners, and the ecosystem.

FOSS Patents blogger Florian Mueller said observers shouldn’t put too much stock in the power of Motorola’s patents, which didn’t deter Apple or Microsoft from suing and may not provide much cover if Google tries to leverage them for legal actions beyond those Motorola already has going on. And it won’t provide blanket protection against some companies who won’t be swayed by cross-licensing deals, plus it means that Google now has to deal with patents suits filed against Motorola:

With respect to ongoing and future patent disputes (besides the ones in which Motorola is embroiled with Apple and Microsoft), there are many patent holders to whom this deal doesn’t matter. I doubt that Motorola Mobility holds a lot of patents that Oracle would be concerned about (while some of the patents Google recently bought from IBM could be useful against Oracle). There are medium-sized companies like Gemalto and Vertical Computer Systems. They most probably won’t be affected. And there are numerous non-practicing entities trying to collect royalties from Android device makers. Since they don’t have products of their own, no one can assert any patents against them. What will certainly change is Google’s need to engage in inbound licensing from such patent holders.

Google’s partners may publicly support the deal, but questions abound regarding how manufacturers will proceed long-term if they’re competing against Motorola for early access to Android releases and other advantages. Jason Hiner, Editor in Chief of TechRepublic said the deal could push HTC and other partners to start embracing Windows Phone 7 more, and it could ultimately prompt Microsoft to buy Nokia outright instead of partnering with them. Or Microsoft might consider buying up both companies in a bid to compete with Apple and Google. According to Hiner:

With all of its main rivals — Apple, Google, and HP — now vertically integrated in mobile, Microsoft is going to have to seriously consider whether it has to go the same route. If it sticks to the third-party model alone, it will have a hard time keeping up, since it takes a lot more time to release software and coordinate with vendors than to have hardware and software divisions working hand-in-hand throughout the entire product development life cycle.

Nilay Patel, a writer with This is My Next, tweeted that it will be a hard road for Google to operate a manufacturer while also licensing the operating system, a combo that’s proven difficult for others. He wondered in a longer post why Google didn’t just license the Motorola patents for much less:

All that said, it’s still curious why Google spent the full $12.5b on Motorola, instead of a smaller amount acquiring the rights to Moto’s patents — or the rights to litigate with those patents. (Or even something more like the Microsoft / Nokia deal, which involved patent cross-licensing and joint development by the two companies.) It’s easy to see why Google and Motorola joined forces to make the most out of Moto’s patents — but now they’ve got to explain how they’ll make the most out of what actually matters: Motorola’s products.

Google may not be interested in holding on to Motorola for long. Instead, it might be content to push the Android platform forward, and then spin off Motorola while sitting tight with the patents, which author and media consultant Jeff Jarvis called “rat poison“:

I disagree with those who say that Google had hardware envy vis a vis Apple. Google went into the hardware business and was smart enough to get out. I imagine that Google will operate Motorola as an independent entity; it won’t become Googley. Indeed, I can imagine Google spinning off the product arm, keeping the rat poison.

James Kendrick, a blogger with ZDnet had some interesting thoughts on the deal, saying it would invite an “anti-trust nightmare.” And ultimately, he too questioned how deeply Google is going to get into the hardware business:

Google doesn’t want to be a hardware company. It didn’t do so with the Chromebook, and it doesn’t want to be one with Android. Deep down.

The big pay-off may not be in smartphones. Steve Wildstrom of Tech.pinions said the combination of Google and Motorola, with its set top box business, may give Google another chance to make a play for the living room after its Google TV product has met with slow sales. Wildstrom wrote:

It [Google] could simply follow the Motorola course and go on making the set top boxes that cable operators want, but that seems profoundly un-Googley. Or it could strike a new course, offering the first mass-market home entertainment united that fully integrate cable and internet services. That could revolutionize the business–or drive all the cable operators to Cisco, which has never shown much inclination to rock this particular boat. My bet is that Google will at least try to build the product that Google TV should have been in the first place.

Newsweek columnist Dan Lyons wrote today that the deal shows the savvy of Google CEO Larry Page, who he says managed to get Apple and Microsoft to overpay for the Nortel patents while he pursued a bigger prize in Motorola. And he said it exposes Google’s competitors as patent bullies while at the same time making it easier for Google to get regulatory approval for the Motorola acquisition:

So now Google fires back, makes a huge acquisition, gets into the hardware business, buys up the best IP portfolio in the mobile space — and can position itself as a victim that’s just trying to defend itself against this gang of bullies. The Nortel auction just helps Google get approval for the Motorola purchase. Does anyone really believe this $12.5 billion acquisition just got thrown together in the last few weeks as a response to the AppleSoft patent grabs? Doesn’t it seem likely that Google and Motorola started talking long before the Nortel auction?

But Google may have paid for the wrong patents and could be inheriting more dysfunction than assets in Motorola, said Andrew Orlowski of the Register. He said the patents Motorola owns are mostly in radio engineering and design and most of vital radio patents are already covered by existing patent pools. Mostly, what Google will get, he said, is indigestion from swallowing Motorola.

Google has paid $12.5bn for a negotiating chip that appears to be almost impossible to redeem. In this light, the acquisition looks like panic, rather than a calm and carefully deliberated strategy. Google didn’t take IP seriously, bidding silly numbers (such as pi billion dollars) for the Nortel patents. Then it realised it might be in trouble, and so went out and bought some IBM patents. Now it has splurged $12.5bn, truly believing the IP is going to be useful.

  1. Jason Thibeault Monday, August 15, 2011

    Great collection of quotes from around the web on this topic. I’ll throw in one of mine ;)

    Finally, though, Motorola gives Google what they really want: an inside track into the carriers. Up until now, Google hasn’t had any real connection to the carriers (where all the big, explosive growth in data traffic is happening and, consequently, all the rich data is being produced that would greatly impact ad CPMs; hint hint). But with the way that carrier/handset relationships work (the carrier works directly with the handset manufacturer to customize the handset for their needs and network), Google will now have the opportunity to develop carrier-specific features (i.e., some aspect of their ad network that a carrier can use to generate incremental revenue and which consequently generates additional revenue for Google) that are baked into the very handset and the carrier network. This is a really powerful value proposition (and one which Apple already has; just think visual voice mail).

    http://blog.jasonthibeault.com/index.php/2011/08/15/why-google-motorola/

  2. This one goes under the “No Shit” files. Googles’ argument was honorable, that patents stand in the way of innovation and just become a source of rent. Too bad that patent law and copyright cases are determined by patent lawyers and patent judges, none of whom were ever going to invalidate their own existence by agreeing with Google. Alas.

  3. I’ve heard that “quality, not size, matters” when it comes to patent portfolios. I’ve also heard that “size, not quality, matters” when it comes to patent portfolios. Which is it? Obviously it’s both. In the 24K patents and pending patents that Google acquired, are we really to believe that NONE of them have any value in the escalating patent war with Apple? Remember, it takes only one well-placed torpedo to stop a battleship. Besides, if Florian Mueller thinks that the move isn’t worth much then we all know it is definitely worth a lot!

Comments have been disabled for this post