105 Comments

Summary:

Google may not have had much of a choice when it came to buying Motorola Mobility for $12.5 billion. If it didn’t, someone else would have, putting the company in an even bigger patent hole. Who else was interested in the company? Read-on and findout.

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Google may not have had much of a choice when it came to buying Motorola Mobility for $12.5 billion. If it didn’t, someone else would have and that would have put the company in an even bigger patent hole.

Our sources say that Motorola was in acquisition talks with several parties, including Microsoft for quite some time. Microsoft was interested in acquiring Motorola’s patent portfolio that would have allowed it to torpedo Android even further. The possibility of that deal brought Google to the negotiation table, resulting in the blockbuster sale.

Motorola found a Google deal more digestible because Microsoft had no interest in running a hardware business and was essentially interested in Motorola’s vast collection of patents. Google moved aggressively, and at $40 a share, Google is now paying a 60 percent premium to Motorola’s recent stock price. The deal it struck gives it access to Motorola’s strong portfolio of 17,000 current patents and 7,500 patent applications across wireless standards and non-essential patents on wireless service delivery.

The high-level talks between Google and Motorola started about five weeks ago. Google CEO Larry Page and Motorola CEO Sanjay Jha were talking directly, and only a handful of executives were brought into discussions. Our sources suggest that Android co-founder Andy Rubin was brought into the talks only very recently.

My view is that while Google might have won the battle, in the long run it has put the Android ecosystem at risk. Mobile industry insiders view this as a ray of hope for Windows Mobile Phone 7 to sign-up the disillusioned handset makers who at this point must be reworking their mobile OS strategies.

  1. I seriously doubt Google has any interest in manufacturing. Neither do people at Motorola mobility who the think they are going to be spun off while Google keeps the patents.

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    1. Not sure how this is going to play out, but from what I am hearing is that the hardware business is going to be around for a bit.

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      1. Jason Thibeault Monday, August 15, 2011

        Of course, why would Google kill a business that gives it a critical piece it has been missing in the war against Apple: a carrier relationship? Not only that, but Motorola Mobility produces a lot more than just handsets. They also make a lot of hardware for the home, a battleground where Google has failed miserably (i.e., Google TV) but where Apple has made significant inroads in creating a unified platform (iTunes) that links mobile, TV, and media.

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

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      2. Jason, if you think the broadcasters really didn’t like GoogleTV, guess how cable providers (the real purchasers of Moto settop boxes) feel about it? I’ll give you 3 guesses.

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      3. Karthik Chandramouli Monday, August 15, 2011

        Besides the obvious patent play, it seems that Google took an opportunity to shore up Android loyalty by taking MOT off the table as a potential WP7 customer, to which Sanjay had recently alluded. Google gains a baseline of 30+ million units per year, which shores up Android against any minor defections to WP7. Not only was this a defensive IP move, it may have been a defensive move to prevent MOT from diversifying away from Android and fracturing this young alliance.

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    2. Malcolm McLean Tuesday, October 25, 2011

      Oh I agree – manufacturing is a while different kettle of fish than software!

      Headache is too gentle a word for it – a splitting migraine more likely!

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  2. Until MSFT acquired Nokia…

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    1. your world retweeted Monday, August 15, 2011

      Microsoft hasn’t acquired Nokia yet.

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    2. Sorry for the typo…I meant Until MSFT acquire*s* Nokia (or Unless MSFT acquires Nokia).

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    3. Microsoft would be better off acquiring RIM

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      1. Sonia Horanzy Tuesday, August 16, 2011

        Sadly my friend in this arena RIM is viewed as a one trick pony. It’s cache has been lost via the new technologies of Android, iPhone and even the new MSFT Windows 7 phone OS. They’re bound to go the way of Motorola and get acquired if they are so lucky to get a deal.

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      2. Given Nokia’s huge WP7 arrangement with Nokia, it actually makes more sense for a marriage there.

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      3. Major Plonquer Friday, August 19, 2011

        Microsoft won’t buy anyone. At least Ballmer is smart enough not to compete with his own customers.

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  3. Michael Fierro Monday, August 15, 2011

    Om, do hardware manufacturers really worry about this acquisition, or was that just your gut reaction? I don’t think Google has any intentions of competing against the other phone manufacturers, they just wanted the patents. I will eat my hat if Google doesn’t spin out Motorola.

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    1. There is a lot of confusion right now around the whole Google strategy and it would take a lot of work for the company to calm frayed nerves of its partners.

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      1. If I’m HTC, Samsung, or one of Google’s other partners I have to sit back and analyze this. Apple and MSFT have been beating us senseless with patent infringement cases all over the world. Until today Google had very little to hit back with. They were bringing a knife to a gunfight, as it were. Now they’ve got an Uzi and a bazooka.

        Seriously, if I’m a Goog partner I fear Apple and MSFT *MUCH* more than I fear a Goog/Motorola partnership. This deal may well have restored the balance of power in the madness that is the world’s patent/IP schemes.

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      2. This isn’t a cold war, Michael. This is a all out scramble. Google having a potential weapon will in no way stop Microsoft from demanding money and Apple from demanding manufacturers desist from using their ideas. Google’s new patents don’t change the equation enough.

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      3. Yup, what “Michael S Collins” said. By the way, I’m not sure Google is paying such a premium after all. Carl Icahn — who has representation on Motorola Mobility’s board and was in on the deal — just said on Bloomberg that part of that $12.5b price, includes about $3b in cash that MM is sitting on, and about another $3b for the set-top business.

        Not looking bad for Google.

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      4. ARMdevices.net Monday, August 15, 2011

        You’re just speculating. Due to your contacts in the Mobile industry (you organizing Mobile conferences and all), maybe it would be wise of you to state when you are speculating and when you are basing your text on stuff you heard from the top people in those actual companies.

        My guess is all Android companies are way happy, Google will use those 19 thousand patents to kill off any attempts from anyone to sue Android partners anywhere in the world. If Apple insists to sue Samsung in Germany? Bang, Apple may not make mobile phones anymore worldwide.

        Only troubles left to sort through are people like Oracle who don’t really as far as I know are directly involved with mobile technology.

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      5. People seem to think that Motorola can be Android’s silver bullet when in fact Microsoft and Apple had already sued Motorola before this deal. They are not immune to patent risks. In fact, in Germany there is litigation against the Motorola Xoom tablet on the way, and Apple is shooting for another injunction.

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      6. Callum Masson Monday, August 15, 2011

        What other options do these carriers have? Putting Windows on their phones makes them Windows phones, rather than HTC or Samsung.

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      7. Kevin C. Brown Tuesday, August 16, 2011

        This is a nuclear arsenal to use for a MAD strategy against the Two Evil Steves. If Apple doesn’t quit playing their IP troll game, GOOG can block iPhone6 in the courts until Jobs is long gone from his corporeal body. GOOG doesn’t survive from phone business, Apple does.

        The Two Evil Steves now have to make a decision to compete in the market or take their whipping in the courts.

        Good for GOOG!

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    2. MMI, spun out sans patents, is what? A $2 billion dollar business, add in cash, a $4 billion dollar business? How will GOOG investors feel when they find out they bought $8 billion in patents that may or may not save the day?

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      1. Rurik Bradbury Monday, August 15, 2011

        Motorola’s patents are significantly more valuable than Nortel’s, and those went for over $4 billion.

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      2. You seem confused, Rurik. That’s exactly what I said. I was trying to come up with a hypothetical valuation fro MMI without patents and after 2 or 3 years of multiple spinoffs. No one would want to buy them, so Google is stuck with them. They need to make it appear as if this is not a $8-10 billion patent purchase.

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      3. They should feel better than having a money losing hardware business with 19,000 employees of varying worth to worry about.

        But my feeling is this is all about the iPad — Android tablets have flopped miserably, Google may have seen the writing on the wall — if they didn’t start making their own Google branded tablet hardware, the entire tablet market was about to be ceded to Apple and the iPad.

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      4. Rurik Bradbury Monday, August 15, 2011

        @Tim F: sorry, totally misread your comment. Yes, you are right that it’s essentially an $8bn patent acquisition. Maybe HTC might want to buy a patent-free Motorola for the brand? It’s weak though — when they could have bought Palm in 2010 for a billion and change, *including* the patent portfolio.

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    3. What if Google opens up the patents across all it’s partner handset makers for Android manufactured phones?

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  4. There is not much to differentiate hardware these days – witness the specs for the Android tablets out there currently. It appears that demand is driven on the software side – for all the talk of Android fragmentation among multiple manufacturers – they are still activating 550K or so per day. Does anyone have any reliable numbers for WP7? And does anyone think that a big hug from Samsung or HTC will change those numbers?

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  5. Google has made it clear that they aren’t going to contain Android or block handset developers from still using Android and a few developers have already issued statements of support because, when you get right down to it, they too have licensing protection by proxy if they are in bed with Android.

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  6. Apple suing Google has put Apple at risk, as now Android will be an even stronger platform, as there will be a solid, state of the art hardware system that all other manufacturers of Android OS based phones can deliver. Apple is suing Google to hold it back, trying to avoid what happened to it with PCs when Microsoft copied them and then dominated the market. However, it will backfire on Apple, as Google will not only have state of the art OS software, but hardware as well, where Apple has enjoyed the advantage. Until Apple opens up its system, Android will eventually garner 75% of the market (it is already at 48% to Apple’s 18& global share). Apple needs to stop suing, and open up its platform to other manufacturers. It looks like it will be a post Steve Apple that would allow such a possibility.

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    1. What fantasy land do you inhabit?

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    2. Apple isn’t suing Google. Maybe you were thinking of Oracle. However, Motorola was/is suing Apple. You really need to get your facts straight before posting.

      As for Apple licensing iOS, that will never happen with or without Steve Jobs. iOS has 70% of the profits, 90%+ of the tablet and personal media player with apps (aka iPod Touch) markets. They aren’t haring that pie no matter what Google does (and PS if Apple felt the least bit threatened by the Motorola purchase they would outbid Google for it — they don’t and they won’t).

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      1. Apple is suing Google by going after Samsung and others.

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      2. Larry Ellison at Oracle may very well be suing Google on behalf of his good friend Steve Jobs at Apple

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      3. Oracle is suing Google as Larry Ellison may be trying to defend his friend Steve Jobs at Apple.

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      4. Marcos_El_Malo Monday, August 15, 2011

        @Roy: You *really* need to do some homework! I suggest starting with a dictionary and maybe a thesaurus.

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      5. you are the one living in fantasy land, Apple going after Motorola is impossible due to anti-trust concerns. Doesn’t matter how much money they have.

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    3. TONS of patents!!!
      Anybody here can tell us how many of ‘em Apple, Oracle and Microsoft have already licensed, or how many MMI just sat on without trying to get anything for ‘em? Any guess how many cell phone patents Oracle, which doesn’t sell any phone hardware, wants, in addition to whatever rights they now have?

      “Inquiring Minds Want to Know!” ©

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      1. The separate Apple and Microsoft each involve a little more than 20 Motorola patents. I would imagine they would have already used most of their best ammo at this stage of those cases.

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    4. er, no. apple will never license iOS. theyve been down that road, and it didnt work.

      youre also wrong that this is playing out like the Windows/Mac war. for many reasons. one of which — iPhone is the #1 selling smartphone in the world, and Apple is the most valuable company in the world.

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      1. Kevin C. Brown Tuesday, August 16, 2011

        iPhone is the #2 selling Smartphone in consumers’ minds. They have a choice and iPhone ain’t #1.

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      2. really iphone 4 is now outselling the samsung s2 – dont think so -

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      3. The Samsung Galaxy S II has only started selling in the US. So what you’re saying is that the cumulative total of sales worldwide compared to the Galaxy S II’s non-North American sales is greater — when US consumers have one of the largest purchasers of Android handsets.

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    5. Mister_Snitch Monday, August 15, 2011

      Always nice to hear from a well-informed Android fanboy. (Please, someone – find one for me.)

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    6. yes roy u sound too funny. There s definitely a drawn line between Google being Google and manufacturers…

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    7. PhoneOS market share only matters in so much as to profits and influence on the developer ecosystem. Apple is the undisputed profit leader in the hardware space, taking 2/3rds of smartphone profits with about 25% of the marketshare. And even though Android is gaining marketshare wise, the developers just aren’t flocking to Android in the way most expected. And that’s because developers aren’t making money on Android apps due to the nature of the Android ecosystem. Nearly all of the mobile app profits are going to Apple and their developers. So, I think Apple is not only OK with how things are shaking out, I think they’re in the driver’s seat at the moment. New markets don’t always adhere to old market rules.

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  7. Um, windows mobile? Really? Microsoft is phasing out that Os, so why would htc and samsung put their fortunes in that camp? Might want to get your facts straight!

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  8. Santosh Panda Monday, August 15, 2011

    It seems India’s Videocon had plan to buy Motorola Inc.’s mobile-phone operation $3.8 billion in 2008 http://bloom.bg/rdyP2J

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  9. There’s this…
    Now they’ve lost their GPL Linux license it appears – http://t.co/urlOKPA
    Things just keep piling up because Google was so sloppy – Can they really recover?

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    1. Rurik Bradbury Monday, August 15, 2011

      Well you can’t “lose” a GPL license — it’s not like a license to practise law or operate a casino. But you can breach its terms. And then you fix your mistake.

      It’s strange how there is a sudden epidemic of GPL FUD astroturfing — did Microsoft dispatch a secret PR team onto the internets?

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      1. Marcos_El_Malo Monday, August 15, 2011

        That’s not true. See section 4. Once terms are breached, the license no longer applies and the breaching party is now in violation and must reach a new licensing agreement with the copyright holders . . . EACH of the copyright holders. There is no guarantee that all of the copyright holders will allow a renewal of the GPL2 based on simple compliance. It only takes one hold out, and the breaching party is vulnerable to injunctions to cease selling/importing the product that violated the GPL2.

        It doesn’t matter if the breech occurred in the past and the distributor is now in compliance. Once the violation occurs, the violator has forfeited the GPL2 license.

        If it wasn’t for Section 4, the GPL wouldn’t have teeth. These are the facts, not FUD. If you’re going to make astroturfing accusations, you might want to study up before posting.

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      2. Marcos_El_Malo Monday, August 15, 2011

        Maybe I don’t know what I’m talking about either! Let me refine my comment:

        The violation of the GPL2 wouldn’t necessarily apply to all of the kernel, just those parts owned by a copyright holder that wanted to enforce it. If the part held by such a copyright holder was a trivial snippet, it could be rewritten or worked around before there was much damage to the OEM. If it was integral to the kernel, the situation would become dire.

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      3. Kevin C. Brown Tuesday, August 16, 2011

        No, just loads of IT wannabee Apple fanbois.

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    2. Yes PXLated, we would like to get opinions from a biased Apple fan like you who is very objective. I guess all designers like you just drool over Apple.

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    3. 1 This doesn’t directly affect Google since it’s the handset manufactuers.
      2 “Most Android Manufacturers” does not mean most Android handsets. The largest Android handset and tablet manufacturers are GPL compliant. The ones that are non compliant are the small Chinese shops
      3. To see the effect this will have we only have to look at cases where this has happened before. The Lawyers for the Open Source crowd want compliance more than anything else and in the past have given companies plenty of time to correct the problem and settle. In some cases they have been forced to prevent manufacturers from distributing GPL code but that’s been rare.

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  10. Does MOT/MMI hold a Java licenses?

    NFC [HW] for Google’s strategy, or Apple will dictate the future integration of data Google needs for search. Context is about data integration. Sensors (HW) will create a lot of the data in the future. As we have seen with Bing deals companies are not afraid to bypass Google for deals, but Google needs the data.

    Question: What about Google voice, will the carriers keep MOTOGOO devices with a little negotiation if Google voice goes away? Will MS shut up if it does and skype prevails.

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