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Winners And Losers From Five Days That Changed The Mobile Market

What’s left to say at the end of a pivotal week for the modern mobile computing market? Plenty.

A week that began with a Googlequake–a $12.5 billion acquisition deal for the company that invented the cell phone–ended with the sad decision of a tech legend to exit a market it had barely given a shot. Both moves will have ripple effects across an industry that is ripe for even further consolidation, as the race to define the next generation of computing grows tighter and the stakes get even higher.

It will take several months before we know exactly how Google’s deal for Motorola (NYSE: MMI) will affect the Android ecosystem, but it’s hard to imagine things will ever be the same despite the public support of partners like HTC, which reiterated its backing for the deal on Friday. Likewise, until we learn the fate of WebOS, it’s hard to know how HP’s decision to re-embrace the boring-yet-profitable world of Big Iron computing will give someone else the opportunity to breathe life into an operating system that gives new meaning to the old definition of potential: a fancy word that means you haven’t done a damn thing yet.

But here’s how the landscape has changed for the major players in mobile:

Apple: Well, nothing has changed for Apple (NSDQ: AAPL). Steve Jobs and Tim Cook probably exchanged a bunch of snarky comments at how Google (NSDQ: GOOG) just spent 1/3rd of its cash reserve for a company that’s losing steam among U.S. smartphone buyers for no other discernable reason but its patent portfolio. And it’s not clear that Apple had even acknowledged WebOS as a competitive threat, despite the fact that it was shaped by Jon Rubinstein, an old Apple hand. Such is life in 2011: Apple sits above the fray, free to concentrate on its supply chain and honing its craft while others scramble desperately to emulate its success.

Google: Say what you want about Larry Page, but he is not an indecisive man. Google’s co-founder and CEO made the second-boldest M&A deal in tech this year (AT&T/T-Mobile set the standard) with a $12.5 billion bid to purchase Motorola this week, setting the stage for a delicate balancing act over the next year. There are several sides to this week’s developments for Google.

The good: If approved, Google gets patent protection that could save Android. The deal could give Google a way to realize the ultimate potential of Android by eliminating fragmentation and concentrating on a Google-branded series of devices.

The bad: Google can’t really go down that road unless it wants to blow up Android as we currently know it. Motorola employees and Google employees will probably have a year or so where they resemble two sides of a junior high school dance, eyeing each other awkwardly from across the gym floor. And the separation of WebOS from HP (NYSE: HPQ) could tempt former Android partners surprised by the Motorola deal to call Google’s bluff and pursue an integrated hardware-software strategy of their own.

Microsoft: High fives were in abundance in Redmond this week. Microsoft’s aggressive patent strategy is what forced Google to make the Motorola deal, and it’s not even clear if Motorola’s patent portfolio is enough to completely defend Google and its partners against Microsoft’s advances. And for everyone who gives Microsoft (NSDQ: MSFT) grief about pouring money down a hole with its Web strategy, Google may have just out-Binged Bing: Microsoft lost $2.5 billion on the Web during its last fiscal year. It could take Google forever to recoup a cash investment five times as large.

Along the same lines, HP’s decision to put WebOS in limbo can only benefit Windows Phone 7, which is now potentially competing for licensing deals with a big partner in Nokia already committed to the platform. Microsoft’s deal with Nokia puts the Finnish company first when it comes to developing for the platform, but developers are showing more interest in the software. And if HP only wants to commit to one licensing partner for WebOS, as vice president of developer relations Richard Kerris suggested on Twitter Thursday, then Microsoft could enjoy a nice competitive bidding position.

Research in Motion: Like Apple, RIM (NSDQ: RIMM) isn’t really affected by these moves, but for completely opposite reasons: it’s sort of screwed anyway. The new BlackBerry 7 devices suffer from pricing missteps, and Android was already making gains against the BlackBerry at major wireless carriers. There might be room for RIM to strike back as the carrier-friendly operating system should Google pursue a completely integrated development model that cuts out partners like HTC and Samsung, but that doesn’t seem to be the plan at the moment.

WebOS developers: This is not a big crowd, but it’s one that nonetheless deserves sympathy and study as a cautionary tale. Betting on underdog technology is a classic long-shot scenario: it’s something that will pay off handsomely should it round into form, but there’s a reason why it’s so easy to gain pole position on an underused operating system.

Instapaper’s Marco Arment perhaps put it best:

Developers come, generally, when at least two of these three criteria are met:

1. Developers themselves use and love the platform’s products.
2. The platform has a large installed base.
3. Developers can make decent money on the platform.

WebOS hit none of those areas. It’s reliance on HTML and Javascript development technologies should have theoretically enticed developers who were already familiar with Web development, but there’s no evidence that those folks jumped on board in hopes of seeing a large installed base or money-making opportunities.

Android partners: Perhaps the most interesting decisions over the next few months will take place in the boardrooms of companies like Samsung and HTC, loyal supporters of Android that actually owe Google a debt of gratitude for providing them with a good-enough mobile operating system that could compete against Apple.

Do they take Google at its word, that it will operate Motorola as a separate company unsullied by association with its corporate parent and exclusive supplier? Or do they look elsewhere and throw away several years of worthwhile investment in Android for fear of being shortchanged by the Google-Motorola alliance?

One thing that can’t be ignored is that a patent-poor Android partner could have quite a bit to gain by purchasing the WebOS group outright from HP and bringing a treasure trove of valuable mobile patents under its wing. It’s unclear what kind of price HP could put on WebOS, but with mobile patents going for about $750,000 a pop these days, HP could definitely make money on its $1.2 billion investment in the former Palm should it want to go down that road.

Consumers: There’s little consumer impact from HP’s decision: the whole reason we’ve reached this point is because nobody was buying the TouchPad or Veer devices. That is, unless you’re looking for an el cheapo tablet. While someone else might be able to make a consumer play out of WebOS, it’s currently hitting with two strikes.

But Google’s Motorola buy could have any number of consumer ramifications depending on how everything shakes out. A truly integrated Android software-hardware arrangement could eliminate a bunch of the headaches that surround Android, like incompatibility and annoying manufacturer-driven user-interface skins that slow the performance of the phone. And it’s clear that patent protection could prevent Android from disappearing entirely.

However, if Google’s Motorola buy alienates other Android vendors, we could find ourselves in a situation with three major products: Apple, Google/Motorola, and Microsoft/Nokia (NYSE: NOK). Samsung, HTC, and potential tablet players like Amazon (NSDQ: AMZN) won’t disappear overnight, but the long-term effects of Google’s decision could force difficult decisions for those companies. And with consolidation quite possible in the wireless carrier market, should consumers really be excited about potential consolidation in the mobile software and hardware markets?

2 Responses to “Winners And Losers From Five Days That Changed The Mobile Market”

  1. Henry_3_Dogg

    “Microsoft’s aggressive patent strategy is what forced Google to make the Motorola deal…”

    Really? Those that have signed up will still have to pay.

    But since MMI spent the prior week rattling its own sabre, it’s more likely Google’s hand was forced my MMI themselves, and the damage to the Android community if they started suing the others.