Google’s surprise $12.5 billion bid for Motorola Mobility this morning is a bold attempt to move the needle for Google on several fronts. Google is going all in, dipping into its $39 billion of cash to make its biggest acquisition ever. The deal signals that mobile will be one of Google’s main growth drivers and that growth will come from entering new markets, specifically mobile hardware. With the acquisition, Google gains a portfolio of 17,000 patents and another 7,000 patents pending globally, an area where it is a currently a laggard. But more than anything, it signals how crucial it is for Google to control the Android experience from soup to nuts.
There may now be 150 million Android phones and they command the largest smartphone market share, but the most popular single smartphone by far is still the iPhone. (The iPhone has the most market share for any single smartphone device, whereas the Android OS has more share across devices). Buying Motorola is an acknowledgement on Google’s part that it must control the experience from software to hardware if it hopes to unseat Apple.
Up until now, Google has taken the Windows approach to mobile—create an OS that all manufacturers can build on top of and just concentrate on the software—but that approach is not enough. More than 550,000 Android phones are activated every day across 39 manufacturers, but there is no single phone or Android manufacturer that can best the iPhone. By owning Motorola, Google can create Android phones to its exact specifications and take advantage of the latest advances in the operating system, just like Apple does. When CEO Larry Page says that buying Motorola will “supercharge” Android, that is what he means I suspect.
Page is careful to note that “Android will stay open” and that Motorola will remain but one of many licensees. But there is no doubt that if the deal passes antitrust review, Motorola’s Android phones will be the first among equals. Google also gains a strong foothold in the living room with Motorola’s set-top box business, which could help its lackluster Google TV efforts
It’s a big bet. What if Google messes it up? Well, it will still have all those mobile patents, which arguably could be worth a good portion of the total acquisition price. Remember, Nortel’s patents went for $4.5 billion to Google’s competitors. During today’s conference call explaining the deal, Page noted that Motorola’s “strong patent portfolio” will help Google defend Android against “Microsoft, Apple, and other companies.” The first two questions on the call went right to the patent issue as well. With Android under attack on the patent front by Apple, Microsoft, Oracle and others, buying Motorola is very much a defensive move as well.
Google provides search and advertising services, which together aim to organize and monetize the world’s information. In addition to its dominant search engine, it offers a plethora of online tools and platforms including: Gmail, Maps, YouTube, and Google+, the company’s extension into the social space. Most of its Web-based products are free, funded by Google’s highly integrated online advertising platforms AdWords and AdSense. Google promotes the idea that advertising should be highly targeted and relevant to users thus providing...
Motorola is known around the world for innovation in communications and is focused on advancing the way the world connects. From broadband communications infrastructure, enterprise mobility and public safety solutions to mobile and wireline digital communication devices that provide compelling experiences, Motorola is leading the next wave of innovations that enable people, enterprises and governments to be more connected and more mobile. Motorola (NYSE: MOT) had sales of US $22 billion in 2009