Editor’s note: Contributor Saul Hansell is the Big News editor for the Huffington Post.
I believe Larry Page when he says that Google started looking at Motorola for its patent portfolio and then decided that there was no reason not to buy the whole company. Hey, the $12.5 billion price tag is less than a third of Google’s cash on hand.
But one of the best bonuses from the deal for Google is that it might well spur Microsoft to buy Nokia or RIM. That would doubtless destroy either acquired handset maker and any operating system it controls. And it would weaken Microsoft, something Google executives rather enjoy.
For Google, buying Motorola Mobility is relatively low risk, as $12.5 billion deals go. Motorola Mobility has already done its painful restructuring (separating from Motorla Solutions), is already aligned around Android, which is a surviving platform, and is run by Sanjay Jha, one of the most capable CEOs I’ve ever met.
Henry Blodget lists some of the real risks of the deal. As long as Page lets Jha keep Moto on the track it’s on, I don’t see those as huge. As annoyed as HTC and Samsung may be, there’s no evidence that they would do better by dropping Android for Windows Phone, even if Motorola is the favored child. And Google has a lot of incentive to keep the Android universe as big as possible. (Samsung, of course, is one of the largest component suppliers for the iPhone, even as it battles Apple over patents. So relationships among giants can be rather complex).
The risks for Microsoft, however, would be far greater were it to buy Nokia (market cap: $23 billion, before any acquisition premium) or RIM ($13 billion). Both manufacturers are in serious need of operating restructuring and a viable growth strategy in the world of the app-driven smartphone. What are the odds that Microsoft and Windows Phone have what either company needs? And even were Microsoft to ultimately be successful, how much time and money would it take, diverting resources from investing in areas that Google really cares about?
A few more thoughts on the deal:
Google Strategy: This deal is not an endorsement of the Steve Jobs doctrine that the best way to be in the software business is to control the hardware that runs it. Google believes that, but only really for the hardware that runs its data centers. Google is to its core a cloud computing company. It sees end-user hardware as little more than devices to run browsers of various sorts.
Cellphones: This doesn’t really change the dynamic in the market. It’s hard to see how much different Motorola’s Android lineup will be because of the deal. Moto already offers phones with the Google name and deep cooperation with Google engineers. It’s not like Google’s Nexus lineup has been much of a hit.
Television: There is much more potential for impact in the living room. Moto is a very large cable box maker. Google TV has not caught on yet, and this could be the wedge to get it (a browser for the TV with a big search button) into millions of living rooms.
Future: I’ll bet that Google spins off the manufacturing business within the next few years. In the end, client hardware is just not what they do. It is essentially a commodity business that they don’t need. Larry Page will have been able to bolster Google’s defenses against patent challenges, give Google TV a fighting chance, and still spend most of Google’s energies on cloud services. And if he tricks Microsoft into believing hardware is important enough to waste $20 billion and several years on, all the better.
Photo credit: Len Burgess