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Analysis of Google's Motorola Acquisition
bonch writes "Pundits have been analyzing Google's Motorola acquisition since its announcement. Dan Lyons, formerly known as Fake Steve Jobs, says Google never cared for the Nortel patents, and that they drove the bidding price up intentionally while negotiating to buy Motorola. This idea is questioned by MG Siegler, who believes buying Motorola for $12.5 billion — almost two years' worth of Google's annual profits — is an act of desperation. John Gruber notes that Motorola was threatening to wage a patent war against other Android partners during the time they would have been negotiating with Google, and that Motorola likely forced them into an expensive buyout rather than a patent license agreement. Google may have also been motivated by the fact that Microsoft was reportedly pursuing a Motorola buyout."
S&P researchers apparently weren't a fan of the deal.
Both Apple and Microsoft are already in patent lawsuits with Motorola. Google has tried to get some smartphone patent portfolio for themselves too, but they just burned $12.5 billion on patents that
1) don't help them at all against Apple and Microsoft
2) alienates other Android manufacturers
But there isn't much Google can do. People act weirdly and make mistakes when they're surrounded and desperate. Google made their mistake here.
I don't think they paid that much $$ to become a Droid maker-- there are many less expensive ones to deal with. But it does put a red flag in front of Microsoft.
It's a game of chicken, where Google says, ok, lay off my pals that are making Android phones, or you have to sue, us, too-- and you don't REALLY want to do that, do you?
Moto can have flat revenues for the next decade but at a half-million new Androids registered a DAY, Google won't care. Apple knows that once you get users, they hate to leave and have to learn something new, get new contracts, and so forth. So unlike the junk they sold before, telcos get much more customer "glue" with affinity-based purchases based on operating system preference, and they know Apple and they know Android, and to a lesser extent, RIM and WebOS/Palm/HP. Windows? I guess we find out next month.
---- Teach Peace. It's Cheaper Than War.
Because, lets be perfectly honest for a moment, there is no Android phone that comes to the simplicity and ease of use as an iPhone. Now, while I prefer Android to an iPhone, it is because of the interesting, geeky things you can do with Android that you can't do with an iPhone (emulators, other app stores, no need to use iTunes, can use an SD card and get as much memory as you want, better multitasking, etc.). But when it comes to ease of use, the iPhone has Android beat in every way.
For example, if I'm trying to tell someone on an iPhone how to change settings, its pretty easy, hit the settings button, then go to X then go to Y then hit Z. With Android it is a mess, the settings that worked with 1.6 are different than with 2.2 and then what works on an HTC with sense is different than a phone running stock Android which is different than a Samsung with TouchWiz which is different than MotoBlur.
Not to mention that depending on the carrier, updates either happen delayed or not at all. For example, the exact same internals of a phone running on T-Mobile might get updated in August, while the Sprint counterpart might skip that update, and the AT&T phone might get the update in October.
All these silly things are keeping Android from being a serious competitor to the iPhone for a lot of people. Rather, Android is just an off-brand iPhone, for use until they can afford an iPhone or their carrier gets it. A mass-marketed Google phone could change that.
Taxation is legalized theft, no more, no less.
Both Apple and Microsoft are already in patent lawsuits with Motorola. Google has tried to get some smartphone patent portfolio for themselves too, but they just burned $12.5 billion on patents that
1) don't help them at all against Apple and Microsoft
2) alienates other Android manufacturers
But there isn't much Google can do. People act weirdly and make mistakes when they're surrounded and desperate. Google made their mistake here.
Here is one for left field ... suppose Google creates a community cross-license (CCL) pool for Android, similar to the CCL pool for WebM.
http://www.webm-ccl.org/
Most of the 31 Android manufacturers join the new Android CCL pool, and chip in their own patents as well, so that all members of the pool get a zero-cost license to use all of the patents in the pool. Non-members still have to pay license fees.
It becomes possible for members of the Android CCL pool to build an Android mobile device completely covered by patents for zero license cost. Meanwhile, makers of iOS or WP7 devices still have to pay license fees.
Makers of Android devices can produce mobile devices at much lower costs while still protected by a large patent pool for which they are licensed.
Patent war against Android evaporates. Android is far cheaper for consumers than WP7 or iOS, Android wins, as do consumers. Massive PR win for Google. WP7 and eventually iOS devices effectively disappear. All Android mobiles can render WebM video. Google reaps in heaps of cash, even while collecting zero royalties.
You know, your post made me wonder if that's perhaps part of the reason they made the purchase.
Google support sucks, because Google doesn't _have_ a support organization -- and they don't know how to build one, either; it's not something that lends itself to the sort of algorithmical scaling that's their strength.
MMI, on the other hand, presumably has a support organization that Google can leverage to build a support organization for their other products that need them. They might consider that valuable.
They're on a roll. Don't distract them with facts.
The fact that Google is buying Motorola Mobility is interesting itself of course, but the reportage is interesting too. It's getting a ton of press, almost all of it gloom and doom. BusinessInsider goes on about some of the major properties in the deal, but misses some major ones like factories around the world, an ARM Architectural license, and other things.
I don't think this is a bad deal for anybody involved. Sure, MMI isn't an earnings star right now - but they just finished a painful reorg and are on track to do very well now that it's over. Even at their worst they weren't burning WP7 marketing kinds of money. Their share has been declining, but they still have more of the market than WP7 does. Google gets some more patents for their growing defensive arsenal, which means the rest of us get to keep getting ever-better shiny Android widgets. Google's Android partners get a tough defender - and now it looks likely they'll be able to assemble a patent pool terrifying in extent. Moto might even stop with that Blur and locked bootloader nonsense. Moto doesn't get carved up and eaten by another phone vendor. The US factories don't close. There's lots to be happy about.
As you note, it's barely a dent for google. Google will make almost as much income in the time it takes for the deal to close, or half as much at least. People were already complaining Google was hoarding cash. MMI will probably spin off some money too.
So why the panic? I suppose it's disruptive. On Friday a lot of folks thought they had a plan to kill Android. Now they're going to have to go back to the drawing board. People don't like too much change.
Help stamp out iliturcy.
If you were HTC or Samsung, how comfortable would you be in using the OS of your competitor?
If you were Apple, how comfortable would you be using touchscreens, memory and other hardware from your competitor?
"I've got more toys than Teruhisa Kitahara."
I was going to finish by saying that I have to agree with Gruber on this one. While Google was in active negotiations with Motorola, Motorola CEO Sanjay Jha, and their largest shareholder, Carl Icahn, were making public statements about attacking other handset manufacturers with their patent portfolio, as well as the possibility of licensing Windows Phone 7. The timing of the statements can't have been a coincidence, and I'd be wiling to bet that they were designed to pressure Google at the bargaining table. The deal so generously favors Motorola that it sounds to me as if the terms were dictated by them. I think Motorola was in the driver's seat the entire way.
You do not "fein interest" in something by bidding a few billion dollars. What if they had won? Very obviously they meant to get that, or at least it was a serious attempt.
Apple and Microsoft got a huge patent bundle for far less than Google, which they can now use to defend against Motorola patents Google has acquired, so in fact Apple and Microsoft (and other partners) have been shown to be eerily prescient in requiring said patents even IF this had been Google's plan all along.
And speaking of "overpaying" - Motorola has been losing money. It's not like Google has ONLY paid 12 billion dollars, they have bought continuing obligations that will cost more. And in case you hadn't noticed, 12 billion is a HUGE sum, far more than Microsoft and Apple shelled out individually - how can you say in one breath that those companies overpaid when Google bought the same commodity (patents) for a far steeper price?
I mean yes Google can use these patents against Apple/Microsoft but I question if the Motorola patent base has the same level of quality as what Microsoft/Apple had individually, never mind the Nortel stuff. Sure Google can go after them but all Google has really bought into is a very expensive draw, at best.
Which points to the real reason Google purchased Motorola - they needed at least a draw, and were willing to pay ANY price to get it. Which they did, because even though the people at Motorola could no longer design phones they sure could suss out a desperate buyer and take advantage of that...
In the end I question if it's a victory at all, for anyone. Because now Android HAS to start making Google some serious money in a way it did not before. Are you sure you wish to cheer the Android division becoming indebted to Google to the tune of 12 billion dollars and the subsequent changes that will occur as a result?
"There is more worth loving than we have strength to love." - Brian Jay Stanley