Google buying Motorola Mobility for $12.5 billion

[james99]

NEW YORK (MarketWatch) -- Google Inc. GOOG -2.67% said on Monday that it is buying Motorola Mobility Holding Inc. MMI +59.79% , the handset making arm of the former Motorola, for $12.5 billion, or $40 a share. The price is a 63% premium to Motorola Mobility's Friday closing price. "Motorola Mobility's total commitment to Android has created a natural fit for our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers," Google CEO Larry Page said in a press release on Monday

[hugh]

I don't understand this deal for two reasons.

First, the 63% premium seems like a waste of money.

Second, and more importantly, why? By buying Motorola, Google is now competing against a lot of companies that use Android. This could generate a lot of animosity and suspicion in companies that use the Android OS as they wonder if Google is "withholding" code in order to get a leg up on the competition.

[jvincent]

I wonder how much of this is driven by a desire to own a bunch of intellectual property. I'm sure Moto has a bunch.

Also, google no longer has to choose from their different partners to build the next Nexus phone. Of course they will probably stick with the Droid branding.

[Veee]

Originally Posted by jvincent

I wonder how much of this is driven by a desire to own a bunch of intellectual property. I'm sure Moto has a bunch.

This deal is all about the patents. Motoralla has over 14000 of them.

The other Android phone manufacturers are happy because it helps to protect their Android investment from lawsuits.

[hugh]

Google recently lost out on the Nortel auction at $4.5 billion and I suspect Nortel had more valuable patents than Motorola.

While Motorola likely has some valuable patents, I find it hard to think that IP was that big of a factor.

[jvincent]

Not having looked at the patents in any detail I would have thought the Nortel patents would be more more weighted on the infrastructure side whereas Moto would have a lot of patents around handsets.

I'm sure the lawyers will tell us.

[hugh]

Definitely seems like Patents are quite important.

From Fortune

Is Google buying Motorola for its 24,000 patents?

Or Google really wants the 17,000 patents and 7,000 patents pending that Motorola has assembled over the years, including what CEO Sanjay Jha recently described as having
"particular strength in 2G and 3G essential, non-essential patents important to the delivery of competitive products in the marketplace, video particularly compression, decompression and security technologies and finally, a leading position in 4G LTE essential."

[Gino Cerullo]

Very interesting move! I imagine this is a pure patent play that if not handled correctly could come back to haunt them.

They could have outbid the 'consortium' for the Nortel patents and it would have cost them considerably less than the $12.5 billion this cost them but they didn't and they know it so they went after the next best thing. An establish mobile phone company with a patent portfolio but who also brings along the baggage of hardware, something I'm sure Google doesn't want, because it now makes them a direct competitor to their hardware partners.

This reminds me of when Microsoft released the Zune in a desperate move to compete against Apple's iPod/iTunes hegemony. It quickly spelled doom for the 'Play for Sure' platform as all their former hardware partners abandoned them. Ironically, this now could play into Microsoft's hands if Google's hardware partners see themselves disadvantaged by now having to compete directly with Google on the hardware front. Now licensing Windows Phone 7 from a partner that won't be seen as competing directly against them may look more appeal especially if they are also indemnified from further patent litigation.

The only way I see this turning out good for Google is if they sell off or close down Motorola's hardware division. If they close it down then this is an awful lot of money to pay for just the patents. If they try to sell it off they'll have a hard time doing so as the only other thing of value Motorola has is it's name and that isn't as valuable as it once was.

[Francois Caron]

Hello Google!

Unfortunately, patents today have become the new technology bubble. I'm afraid the only people who will truly benefit from all of this will be the lawyers regardless on who's side they're on.

[james99]

Google plans to buy Motorola Mobility for $12.5 billion, the search giant announced today, showing that new Chief Executive Larry Page is willing to
make big moves and risk upsetting Android partners that compete with Motorola.

The move also shows that Page is taking the patent threat to the Android operating system very seriously.

Below is the full text of Page's blog post about the acquisition.

[TorontoColin]

This is huge. I have no idea whether Motorola's patents are more valuable, but they're probably more relevant to handset design.

This purchase also brings a whole host of other benefits for Google which Nortel would not. Google now has an in-house hardware team which they can control. They can set the pace for Android devices, and force the other manufacturers to step up their own games or be left behind. They also now have limitless access to test hardware, and can work directly with chip manufacturers as well. Many of the benefits of control that Apple enjoys, Google can now enjoy as well, but with the added bonus of numerous other manufacturers also interested in selling their product.

I don't think we'll see immediate, wholesale changes at Motorola. Remember that a lot of what Motorola does for the next few months was determined long before Google came in. If the new Nexus device is a Moto device, then that was pure coincidence. That said, I think a lot of what we see from Motorola over the next year will share some insight into Google's so far ambiguous public attitude towards several of the key android questions.

For example:

Will Google do away with MotoBlur?
I'd bet yes. I don't think Google likes the UI skins. Anything they like in Blur they can roll into Android proper now. Eliminating the skin gives users more stock Android choices, but also allows the other OEMs a clear way to differentiate.

How fast will the updates come?
I'd bet Moto will turn into the fastest updating OEM around very, very quickly.

Will Google unlock the bootloaders?
I'm not sure on this one. I think a system like HTC's, where they let you unlock your own but which risks voiding the warranty, might make sense.

Will Google force Moto devices to be SIM unlocked?
Doubtful. Carrier relationships are another important piece of the Moto acquisition. Forcing SIM unlocks would strain that from day one.

Will Google sell all Moto phones contract free?
Again doubtful, for the same reasons as above.

Like I said, I doubt we'll see much impact this year, but next year I'd be willing to bet we'll see this Moto acquisition making major waves in the Android world.

[Gino Cerullo]

TorontoColin, I agree with many of your points but I'm not as enthusiastic about them as you are. I think this creates a big opening for Microsoft's Windows Phone platform as every Android OEM will now hedge their bets and release a Windows Phone 7 alternative to their Android phone. This way, if their relationship with Google goes south they can fall back on Windows Phone and not have to worry about competing directly against Microsoft. This may also have the effect of changing Microsoft's relationship with Nokia as I'm sure they wouldn't want to be seen as favouring Nokia at the expense of any other OEM.

Personally, I bet Microsoft is popping champagne bottles all around their campus today.

[hugh]

as every Android OEM will now hedge their bets and release a Windows Phone 7 alternative to their Android phone.

Do you think they will hedge with WP7 or perhaps WebOS? Both have inconsequential shares right now.

[Gino Cerullo]

Definitely WP7 before WebOS. With WebOS they would still find themselves competing with HP's hardware whereas with Microsoft their is less chance of that happening. Then again, if Microsoft doesn't see their market share increasing they may pull another 'Zune' and release their own hardware in a last desperate attempt to gain any relevance in the market.

[McPatrick]

i hope this doesn't mean the next nexus google phone will have the crappy moto blurr app