So what happens next for the Google-owned Motorola group? According to a blog post announcing the news, Google CEO, Larry Page, says “Dennis and the team at Motorola will be creating the next generation of mobile devices that will improve lives for years to come.” There’s no mention of using Motorola’s patents to protect Google and its Android hardware partners although we’ll likely see just that in future litigation efforts. Page’s remark likely squashes one prediction I made last year about the deal when I said Google would likely spin off the Motorola hardware assets and retain the patent portfolio.

Patents are important, but so is hardware now

Why the perceived change in focus from patents to hardware production then? Because, to a varying degree, depending on your perspective, Android is still a bit of a mess (GigaOm Pro subscription required).

Folks will argue that few consumers actually care if their Android device has the latest software version, but I see more and more customer comments showing the contrary. Ironically it was just yesterday that Motorola communicated why some devices won’t see Android 4.0 and the comment stream lit up a bonfire of jeers. One such device not getting Android 4.0 is the Droid 3, which launched two months after Google said new phones would see software updates for 18 months after release.

Late to the tablet game

Another problem? Tablet sales. Depending on how you measure it, some would say there is no tablet market; there’s just an iPad market. Apple’s slate still accounts for the majority of tablet sales, even if you include the top selling Android tablet — which is less about Android and more about Amazon — from the last holiday season: The Kindle Fire.

Android was late to the tablet game by a year and even then, its first tablet (from Motorola, no less) was rushed and incomplete. Android’s open approach certainly allows for various tablet makers to sit down at the table, but nobody yet is showing a good hand in terms of sales, save maybe Asus and Samsung to a small degree. I still think Google has a chance to use Motorola to kill two birds with one stone: A phone-powered LapDock — something Motorola already makes — that uses both Android and ChromeOS.

It’s all about control

Carriers are still too involved in the overall Android process and part of the problem here. Apple turned the tables and was able to dictate terms to the carriers, giving the company the power to push its own software updates to iPhones. Google has no such power with the lone exception of its Nexus device line. So in order to help gain back control of Android, it will be opening up the Nexus program from one select partner to multiple hardware makers. That allows for total control of the software and gives Google more devices to sell directly to consumers alongside the $399 Galaxy Nexus.

Google is treading a fine line here, to be sure. It needs to rein in an open source platform by creating hardware but without upsetting its current hardware partners. If it can’t do that, Android will continue to be a meta-platform that others use to create their own branded software with skins and user interface tweaks. I think it’s telling that one of the conditions China had in order to approve the Motorola deal was that Google keep Android open for at least five more years. The mobile market surely moves fast, but if I were an Android hardware partner, I’d have a five-year transition plan in the works — think Tizen, for example — because Google’s continued success may rely on a growing amount of Android control.

Thumbnail image courtesy of AndroidPit

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Is Android broken and if so, will Google fix it?
• Analyzing the wearable computing market
• Social media in Q1: commerce and discovery dominated

Bloomberg reported Thursday that Jha will be replaced by Dennis Woodside, currently the president of Google Americas and a Google veteran. Woodside, who had already been named to lead the integration process for the $12.5 billion merger alongside Jha, will apparently get top billing if and when Chinese regulators approve the deal.

Blending Motorola, a storied Midwestern phone manufacturer, with Google, about as California as a massive Internet company can get, is going to be tricky. Google has pledged to operate Motorola as a standalone unit in order to calm the fears of Android partners that Google will treat Motorola differently than the rest of the Android world. Naming a longtime Googler to head the new operation, however, will raise a few eyebrows.

As for Jha, he was unable to completely fix the mobile devices mess left behind by former Motorola CEO Ed Zander while working amidst the chaos of Motorola’s separation into two separate companies. Motorola Mobility is at least in the game when it comes to the smartphone market thanks to Jha’s aggressive embrace of Android, but it is losing ground to rivals like Samsung and HTC and especially struggled over the second half of 2011.

He did, however, return a ton of value to Motorola Mobility’s shareholders by orchestrating the Google deal. After losing a pivotal auction for mobile patents formerly held by bankrupt Nortel, Google was desperate to find any patents it could get and wound up paying a huge premium for the business.

Google declined to comment on Woodside’s future role, reiterating that the deal has yet to close while the Chinese government decides whether or not to intervene. U.S. and European regulators have already approved the deal.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• What the Google-Motorola deal means for Android, Microsoft and the mobile industry
• Research In Motion: future scenarios for its fate
• Analyzing the wearable computing market

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.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• What the Google-Motorola deal means for Android, Microsoft and the mobile industry
• U.S. Wireless Data Market: Q4 and Year-End 2008

Larry Page, CEO of Google, said the move will supercharge the Android platform but doesn’t change Google’s commitment to keeping the operating system open. The acquisition, however, appears to be a bid to bulk up Android’s patent strength, which will benefit from Motorola’s deep portfolio of mobility patents. Apple, Google’s rival in the smartphone sector, is suing Motorola, but the deal does provide much more protection because it provides Google with more patents — a weak flank for the search giant. He said:

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. 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.

The boards of the two companies have approved the deal, which provides a 63 percent premium over the closing price of Motorola on Friday. The transaction is expected to close by the end of this year or early 2012.

The sale provides a big exit for Motorola Mobility, which was spun out from Motorola and has struggled in the face of growing competition from Android manufacturers. Motorola was one of the earliest supporters of Android and helped kick start the momentum for the OS with the Droid handset. Sanjay Jha, CEO of Motorola Mobility said:

This transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers, and partners around the world. We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses.

Again, will this supercharge Android or will this give Android partners another reason to hedge their bets and perhaps look at Windows Phone 7, the polished operating system from Microsoft that has failed to catch any traction so far?

Andy Rubin, who leads the Android effort, tried to assure partners that Google was still committed to them, but how will they react when their OS vendor suddenly enters the hardware business? Some partners haven’t always been happy with Google’s efforts to build a Nexus One smartphone. And some handset makers grumble that they have to work with Google to get early access to Android releases. But this also gives Google a chance to build very integrated devices that combine hardware and software well, something Apple products are known for. But it will, again, pit Google against its manufacturing partners.

Now, we’ll have to see how if this adds momentum to Android or saps it. Will it be worth it ultimately for Google to get more patent protection and its own hardware maker, or could this slow down the Android Express?

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• Is Android broken and if so, will Google fix it?
• Tablet market to hit over 377 million units by 2016

The spin-off contrasts greatly with that of Motorola’s 2004 mobile chip subsidiary, Freescale, which made a $1.5 billion cash payment to Motorola funded in large part by the sale of $1.25 billion in notes. Essentially, Freescale bought its freedom by becoming laden with debt on day one.

The soon-to-be independent handset division has other advantages as well. By leveraging Google’s Android operating system with the right carrier partner in Verizon, co-CEO Sanjay Jha has helped ensure the success of the Motorola Droid. And operating losses for the handset division have dropped to $192 million in the most recent quarter from $840 million in the third quarter of 2008.

With so much potential cash and practically zero debt, as the new CEO of Motorola Mobility, Jha can devote money towards handset design and customized software while riding the Android train to profitability. And if Android starts to falter, the mobile phone company would have cash to spend on its own operating system if it so chose. It’s too bad that Motorola didn’t spin off a cash-loaded handset business sooner, given that HP is now buying Palm for $1.2 billion — Palm’s webOS platform would look great on well-designed Motorola hardware and such a purchase would have left plenty of cash for Motorola Mobility to woo developers with a solid new ecosystem.

Related content from GigaOM Pro (sub req’d):

Marketing Handsets in the Superphone Era

Apple. The Apple case for the iPad is made of a rubbery material that adds little bulk or weight to the thin device. It has the ability to form a stand to prop the iPad up in either landscape or portrait orientation. $39.

Be.ez. Case maker be.ez has the LA Robe sleeve for the iPad. The Robe is fitted to the iPad specifically, and available in a number of colors/ patterns. $29.99.

Belkin. Belkin has an entire line of cases for the iPad, ranging from simple sleeves to leather folios. $39.99 – $59.99.

Booq. Booq has long been a favorite bag maker and now has a couple of sleeves for the iPad. The Boa Skin comes in several colors and is sized for the iPad. The Taipan Sneak is a zippered neoprene case. $24.95 – $29.95.

ColcaSac. ColcaSac products are hand-made out of environmentally friendly materials. The iPad Sleeve is available in a number of colors and patterns. $34.95.

Griffin. Griffin has a line of four cases for the iPad, including a couple of sleeves and a folio. $29.99 – $49.99.

Hard Candy. The Hard Candy line of iPad cases is designed to protect the device like few others. Some of the cases are hard shells while others are unique “bubble wrap” designs. $39.95 – $49.95.

Hip Handmaids iMaxi. You may have seen the iMaxi case for the iPad and did a quick double-take. It is the only iPad case that brings to mind the phrase “ultra-absorbent.” ‘Nuff said. $30.

i-Luv. The i-Luv line of cases for the iPad contains a unique assortment of cases. There are cases that are clear to show off the iPad, and others made of cloth, silicon or leather. $24.99 0 $39.99.

incase. Case maker incase has stepped up to the plate with a number of cases for the iPad. The company’s web site shows no fewer than 6 different cases, and Apple stores carry them too. $39.95 – $59.95.

Macally. When you think of accessories for Apple products, the name Macally is one of the first that comes to mind. They have a handful of cases for the iPad that includes an innovative snap-on cover to keep things nice and thin. $19.99 – $49.99.

ModulR. The ModulR case is part of a system of components that extends the utility of the case. The components available consist of a stand to prop up and the iPad while in the case, a shoulder strap and even a car mount. No price available.

Orbino. The Padova case from Orbino is one of the best cases we found. The rich leather case used in the Padova is gorgeous, and the case also works as a stand. That beauty isn’t cheap. $209.

Scosche. The Scosche is a case that almost made our stand roundup as the Kickback fills both roles. The iPad snaps into the Kickback and can be used while in the case. $44.99.

Skooba Design. Skooba was one of the first companies to make TSA-friendly laptop bags. The neoprene iPad sleeve has a zippered pocket on the outside for carrying little things along with the iPad. $19.95.

Tom Bihn. Tom Bihn bags are always first-rate, and the Cache sleeve for the iPad looks to be no exception. It is a padded sleeve for the iPad that is available in various colors. $30.

Vaja. Spanish leather case maker Vaja is the Cadillac of case makers, and the iPad line proves that once again. All of the Vaja cases are drop-dead gorgeous, but that beauty will cost you. $120 – $170.

Waterfield Designs. San Francisco-based SFbags produces the Waterfield Designs line of bags and sleeves custom-fitted for just about every laptop ever made. The new iPad line already consists of 4 cases, from simple sleeves to cases with flap covers. $19 – $59.

There are no doubt cases I missed and there will be others appearing every day. If you know of a good case for the iPad leave details in the comments.

And until very recently, Rubin had maintained that Google wasn’t going to make a Google Phone. So when news of the Nexus One first broke, I was flabbergasted that after all the denials it was actually doing so. To that end, I asked him: How is Google suddenly in the hardware business?

“Google isn’t building hardware,” Rubin said. He noted how Apple’s iPhone typically carries the tag “Designed in California,” which explicitly points to that company’s hardware roots. Not so with Google. “We are not designers and there are no hardware or industrial designers on my team,” said Rubin. Instead they leave it to companies such as HTC, which has made the Nexus One.

More Google Phones to Come

“For the first time, we’re issuing purchasing orders to the manufacturers so we are now their customers,” he added, “which means we can now have more influence on the device.” That influence is quite visible in the Nexus One, as I point out in my review. And Rubin said Google is working with manufacturers in addition to HTC that also want to benefit from the sales push on Google’s web site.

Andy Rubin with Motorola CEO Sanjay Jha at Mobilize 09

Those words won’t placate some of the company’s partners, which according to my sources are livid at Google’s decision to promote the HTC-built device, which works with T-Mobile USA’s 3G network. Motorola and Verizon , which have collectively spent close to $100 million promoting the Android-based Droid, are said to be particularly miffed at this decision to launch the Google Phone. One look at the Nexus One and no one in their right mind would even consider the Droid. More importantly, imagine competing with the company that makes the OS itself.

Get this report with a $79 subscription to GigaOM Pro!

“People shouldn’t focus too much on the device (Nexus One),” said Rubin. “What’s more important is the strategy behind the devices.” Instead of spending hundreds of millions of dollars on marketing, Google is simply “going straight to the Google customers,” he said. He believes that such a strategy could fundamentally change the way people buy cell phones — in other words, over the web. Already, as he pointed out, people are buying devices (and gadgets) online.

The way I see it, Google has a couple of major problems: It’s facing a splintering of the Android experience, thanks to the growing number of user experience efforts such as HTC’s Sense. And in order to quickly get traction in the marketplace, Google needs to attract more developers. To overcome these challenges, the company needs to seed the market with what it feels is the device that best showcases Android’s capabilities.

150,000 True Fans

Rubin hopes his company can sell, at the very least, 150,000 Nexus One devices. Why? “Because if there are that many devices out there, you are likely to run into someone with a device somewhere,” he reasoned. To be clear, that number is only applicable to the U.S., even though the device will be available in the UK, Singapore and Hong Kong.

Google won’t have any trouble selling that many devices. There are more than enough fanatical users of the company’s services, such as Gmail and Google Maps, to make that happen. The Nexus One and subsequent Google Phones will continue to be tightly integrated with Google’s services.

Cell Phone As a Platform

When I asked Rubin about some of the shortcomings of the Nexus One and of the Android platform in general, he was candid in admitting that there was still work to be done. “We could have easily seeded the developers with this new device with a higher-resolution screen, but we decided to wait till the announcement was made,” he said. Now that the device has been launched, Google, he said, was looking to aggressively woo developers. Expect it to make some major announcements on that front soon.

The world has changed, Rubin argued. Up until now, the software inside the phone and the web were two different entities living in two different worlds. What Android represents is the ethos of the web brought to the cell phone world. “As a company we iterate a lot and now you have a cell-phone platform that you can quickly iterate upon,” said Rubin. “When were you able to do that on Symbian?” Ouch! (Related: Symbian Executive Rips Into Google’s Android.)

I think that’s what makes Android such as interesting platform, as I explained in my essay, The Androidification of Everything. When I asked Rubin where Android could show up next, he said it could be anywhere — from set-top boxes to large-screen devices, even desktop PCs.

Related Research: Google’s Mobile Strategy

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Report: Google’s Mobile Strategy
• What the Google-Motorola deal means for Android, Microsoft and the mobile industry
• Analyzing the wearable computing market

As part of our conversation, Dr. Jha stressed that handset makers need to pick a single smartphone OS and devote resources to it in order to win. He pointed to Nokia and Symbian, Apple and its iPhone OS and RIM’s BlackBerry OS. He used that logic to justify why his company was betting the farm on Google’s Android. Why? Because it’s the best option for the company right now.

“I didn’t have any other compelling option,” he said. “The other OS got pushed.” I asked him if he was talking about Microsoft’s Windows Mobile or the LiMo operating systems, but Dr. Jha proved to be too polite to name names and reveal more details. Microsoft’s Windows Mobile 6.5 had been scheduled to make it out of the chutes by May, but won’t hit the market till October.

From what we’ve heard, there aren’t any Windows Mobile-based devices in Motorola’s line-up for 2010, so it’s reasonable to say that Windows Mobile has lost favor at Motorola. Back in February, The Wall Street Journal reported that Motorola was going to cut its ties with Windows Mobile. At the time, the handset maker denied any such moves. A month earlier, however, I hinted at Motorola backing away from Microsoft-based handsets.

Like upstart HTC, a long-time Windows Mobile loyalist, Motorola is focusing its development resources behind Google’s Android OS. Both HTC and Motorola are developing their own user interfaces for Android, which indicates their seriousness about Google’s mobile platform. I wonder if this is going to be a trend that’s going to spread. From what I’ve heard, everyone from Lenovo and Huawei to Dell to Samsung are betting on Android. These companies would have been partners of Microsoft in the past.

I feel Microsoft wasted away many years while it held the top position in the mobile handset business. Microsoft CEO Steve Ballmer recently told analysts that, ”It was a tough year on succeeding with phones, mostly our own issues, frankly.”  (via The Washington Post). Robbie Bach, president of Microsoft’s entertainment and devices business, was more candid, and admitted to problems with Microsoft’s mobile strategy in a meeting with financial analysts and investors. Bach reported that Microsoft’s share of the mobile phone operating system market had declined despite the fact that volumes were up a tad. Microsoft claimed that 20 million Window Mobile phones were sold in 2008.

“To date, we haven’t done as good a job as I would like building relationships and getting the right integration with our hardware partners…You’re going to see dramatic improvement in integration.”

“It is our view that one model, one phone is not going to build volume,” he said. “People are going to want different configurations on their phones. We need to work very closely with Samsung, Sony Ericsson and others to build a broad selection of phones that provide a choice of different pricepoints and different capabilities.”

Funny there wasn’t any mention of Motorola! I wonder if it will be too late for the company to make a comeback, similar to Zune struggling to play catch-up with the iPod. So while there is a lot of focus on Apple vs. Google, the real battle is actually between Microsoft Windows Mobile and Google Android. It looks like Google has drawn its first blood.

(Dr. Jha will deliver a keynote speech and discuss Motorola’s bet on Mobile Internet in our mobile Internet-focused conference, Mobilize 09, that will be held in San Francisco on Sept. 10.)

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• 12 tech leaders’ resolutions for 2012
• The 2013 task management tools market
• How consumer media will change in 2013

YouTube said today mobile video is an “exponentially” growing part of its site. In the last six months, uploads from mobile phones to YouTube have increased 1,700 percent. Since last Friday, when the iPhone 3GS was release, video uploads are up 400 percent per day.

Those are impressive numbers, but they’re growth floating out there in space without axes. YouTube declined to disclose a breakdown of mobile uploads by devices, the total number of mobile uploads it sees, or what percent of all its uploads are from mobile phones.

YouTube is likely to monetize very few mobile uploads, since it only runs ads on videos created by partners who regularly produce videos that attract thousands of viewers. Mobile video tends towards the off-the-cuff and personal. Not to say those videos aren’t valuable to the people who make them, and in some instances of citizen journalism or viral hits, a much broader audience.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• What the shift to the cloud means for the future EPG
• Who and what to watch in the new era of the living room
• Connected world: the consumer technology revolution

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Tablet market to hit over 377 million units by 2016
• CES 2012: a recap and analysis
• What the Google-Motorola deal means for Android, Microsoft and the mobile industry