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Holy Buyout Batman! Google Acquires Motorola Mobility: The Enterprise Mobility Perspective

What better way to start the day than by firing up your computer and the first thing you see is a major shake up in the mobility space.  Google has decided to buy Motorola Mobility Holdings for $40 per share, or 12.5 (insert Doctor Evil tone) BILLION dollars.  That’s only a 60% premium on Friday’s stock price.  Holy cow.  That’s a LOT of money and you can read the official commentary from Google here.

Now here’s where it gets interesting.  One paragraph caught my attention:

This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences.

So basically, Google did exactly what Microsoft did (anoint a premium “partner”) but at a significantly higher cost (and a total guarantee that the OEM partner will not use any other platforms for their hardware).  But here’s where I think it gets supremely interesting.  Why did Google buy Motorola?  For the hardware?  Sure.  But is that worth a 60% premium.  Heck no!

They bought Motorola’s patent portfolio.  You have to wonder how involved in the deal Carl Icahn was.  In fact, check out what Sanja Jha said last week at the Oppenheimer & Technology Conference.

I would bring up IP as a very important for differentiation [among Android vendors]. We have a very large IP portfolio, and I think in the long term, as things settle down, you will see a meaningful difference in positions of many different Android players. Both, in terms of avoidance of royalties, as well as potentially being able to collect royalties. And that will make a big difference to people who have very strong IP positions.

Interesting how the long term was only a few days, no?

There’s also another interesting twist to all this.  In January, Motorola Mobility announced its acquisition of 3LM – a company that makes Android “enterprise friendly.”  This was part of Motorola Mobility’s strategy of differentiating itself from other Android vendors by providing better tools for deploying Android devices in the enterprise.  The question becomes now, does the 3LM code get baked in to ALL Android devices or is this going to remain a Motorola property? (Remember that 3LM’s intent is to license its technology to other Android vendors)….heck take it a step further.  If Motorola is going to be run as a separate business, are they going to still try to license their IP to other Android OEMs or is that all moot now?

The answer is: Only Time Will Tell.  It’s a crazy world out there in the land of (enterprise) mobility and Sanja Jha has shown us that the “Long Term” isn’t that long.  I’m sure the good people at HTC, Samsung and LG (never mind the OTHER Motorola) are thinking long and hard about who they are going to bet on moving forward: Android or Windows Phone.

13 Comments

  1. Posted August 15, 2011 at 11:50 | Permalink

    I think this is a very good development.
    It’s clearly a patent-play and somewhat forced upon them by the IV/MS/Apple Nortel loss.
    It might actually restore some calm in the lawsuit-frenzy. frankly, I’m getting tired of everyone suing everyone else as a business practice instead of actually trying to reach agreements on the issues.

    This is another step in the consolidation of the industry we’ve all been talking about.
    I don’t know that the 3LM component will come in to play, at least in the short term. It’s a brilliant and elegant product and will very likely show up on other manufacturer’s handsets….MotoGoolge is extending it’s reach and taking money from it’s competitors.

    good on ‘em, i say.

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    • Posted August 15, 2011 at 12:23 | Permalink

      Totally agreed that the IP frenzy is out of control. However, I fear that this may only add fuel to the fire as opposed to calming the flames.
      Also, when you say “MotoGoolge is extending it’s reach and taking money from it’s competitors,” are you sure it’s not from its partners?

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    • Posted August 15, 2011 at 13:16 | Permalink

      I tend to align with Philippe’s take that this new “MotoGoogle” could take money from its partners rather than competitors. Google doesn’t currently make money (in the form of royalties) from manufacturers of Android devices, nor does it indemnify them from patent infringement lawsuits. Would any rational person expect Google to simply provide Motorola’s patents and other assorted Android polish (that will cost it $12.5 bil) to other manufacturers for free?

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      • Posted August 15, 2011 at 14:47 | Permalink

        Trying to read the tea leaves today will be an exercise in futility. As I mentioned on Twitter, after an earthquake there are always aftershocks. The earthquake was Google/Motorola. What are the aftershocks?

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        • Posted August 15, 2011 at 16:15 | Permalink

          The mutual gravitation of mobile device makers and *smartphone* platform makers started a few years ago, and is still running its course.

          Over two years ago, Samsung had many, many phones running Symbian. In mid-2008, Nokia announced acquisition of the remaining 52% stake in Symbian that it did not already own. The move was said to be a statement of challenge to the then-emerging Android. Apparently, Nokia wanted to create “the most attractive platform for mobile innovation and drive the development of new and compelling web-enabled applications” with that acquisition! (http://www.readwriteweb.com/archives/nokia_acquires_symbian.php).

          How is Symbian doing these days?! Well, until that acquisition, Samsung had many, many Symbian phones. Almost as soon as Nokia’s acquisition was announced, Samsung phased out all work on Symbian, and eventually stopped support for Symbian phones altogether, while simultaneously embracing Android, and promoting an in-house platform (bada) for mid-tier phones and lately, smartphones. Lately, Samsung has done better with bada phone sales than with Windows phones: http://venturebeat.com/2011/08/11/bada-beats-windows-phone/.

          The most engaging question for me now is how Google’s bid for MMI will affect the Android plans and strategies of device makers (other than Apple, RIM and Nokia): most notably, Samsung, HTC, LG Electronics, Sony Ericsson, perhaps a few others.
          One thing I do not see happening (as an immediate consequence of GOOG-MMI deal) is a move by device makers towards Windows mobile.

          Samsung will surely stay the course with bada (encouraged by recent increase in sales), but not cut out Android work so drastically as they did with Symbian over two years ago. If anything, they may welcome this deal with relief since the threat of harassment over paying patent fees for Android phones will have diminished. Cost advantage will be a key factor coming into play.

          From Samsung’s angle, the net impact of:
          (1) increased bada sales
          (2) MSFT-NOK alliance
          (3) Windows phone royalties
          (4) patent shenanigans around Android and
          (5) GOOG-MMI potential deal
          may just be an even greater encouragement to phase out Windows phones!

          HTC, who were suckered into the $5 patent fee for Android phones, will probably be saying “go get ‘em!” and welcome the GOOG-MMI deal.

          Not sure about the other device makers.

          The longer-term impact over the use of Android by Samsung, HTC and others is a bit harder to fathom. The most immediate reaction among this group, however, may be one of relief, since it appears to diminish the threat that recent arose (with the purchase of Nortel patents and earlier, with HTC’s acquiescence to the Android patent fees).

          As for competition among Apple, Google and Microsoft, (I personally feel), the sooner patent trolling stops being an instrument of competition-killing the better. I welcome any development that contributes to innovation and high quality product development as the primary instruments of competition and money-making in the market.

          Where does this all leave RIM? Acquisition?!

          Cheers.

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  2. Posted August 15, 2011 at 17:42 | Permalink

    The use of patent trolling as an extortoinist weapon in the mobility space, to me, invites interesting parallels with nuclear proliferation among superpowers.

    All it takes is one indiscreet idiot misusing it, and all others are alarmed into perceiving its importance as a weapon and going about stockpiling frantically.

    Ultimately the world reconciles to preferring the presence of several powers over a single entity with enormous power. Stockpiling is then justified in terms of self-defence and deterrence, rather than use in active warfare.

    In my analogy, true disarmament can happen only if USPTO makes sweeping changes to the system.

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  3. Posted August 16, 2011 at 08:05 | Permalink

    But by the same token, your analogy suggests that we are going to have four mobile platforms for the foreseeable future.

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  4. Posted August 16, 2011 at 11:10 | Permalink

    True, with Qnix replacing Blackberry perhaps?

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  5. Posted August 16, 2011 at 18:43 | Permalink

    ps: the relative rankings of these four platforms in terms of market share will keep changing over the next few years.

    The question I have (with regard to smartphone/smartpad platforms) is from the device makers’ perspective: among the top three device manufacturers, Nokia has married into the Windows family while Motorola has sold itself to Google. That leaves us with Samsung– robust as a company, nimble with strategies, and supportive of in-house platform development for smartphones. How will they respond to recent developments, and what can we expect from them over the next few years?

    Similar questions arise of other device makers who depend more heavily on vendor platforms than does Samsung: HTC and LG Electronics, for example.

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    • Posted August 17, 2011 at 09:07 | Permalink

      It’s no secret that BB 8 will be based on QNX. The billion dollar question of course is what will Samsung, HTC and other OEMs do in the coming months?

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  6. Posted August 17, 2011 at 09:18 | Permalink

    If Google doesn’t sell handset division, then I think Android will implode. “Open” and “community” don’t work with you’re competing against your community partners.

    That’s not a prediction. To the contrary, it’s why Google will sell Moto’s device business. It got the patents. The buyer will get protection (IPR coverage, not ownership). And buyers are lurking out there. Huawei has been eyeing Moto for quite some time, as it needs a brand name to enter the USA and to rekindle it stalled European entry. ZTE would have similar rationale. And if not them, Mr. Icahn could well engineer a private equity buyout and launch Moto as a once-again indy company. Google might retain TV to breath new life into GoogleTV. Net? Patents bought on the relative cheap, and the Android community can get back to its domination of Mobile (the non-Apple portion, that is).

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    • Posted August 17, 2011 at 09:42 | Permalink

      But who in their right mind would want to buy the handset division without OWNING the IP? I think that would be a strategic mistake on the part of any buyer.

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      • Posted August 17, 2011 at 14:49 | Permalink

        Both perspectives make sense to me, and cast light on the question of why exactly GOOG might have wanted to buy MMI in the first place.

        If patents were the main attraction (as is made out to be, in the press), surely it was not just a reaction to losing out to Rockstar Bidco on the Nortel patents. The MMI deal must have been in planning for months. It is even possible that Google was eyeing both Nortel and MMI patents for total domination, and Rockstar Bidco did the playing field a little favour by snatching the Nortel patents away!!

        Google might have ambitions much larger than patent accumulation– namely, an integrated hardware-software house to take Apple head on. Depending on how plausible this is, we might see Google either retaining the handset business or spinning it off as an Android licensee. The former is, I feel, riskier unchartered waters for Google.

        Whether spun away or retained, trouble for the Android loyalists like Samsung and HTC will start when Google starts announcing features on phones that are only available to customers of MMI-reincarnate.

        I am certain that Google is very aware of the contributions of HTC and Samsung to bring Android to prime time. Is it possible that such major partners would have woken up to read the acquision news just like the rest of us?

        In the recent quarter, Samsung has done particularly well with Android smartphones and (Galaxy) tabs in may other regions of the world than the US, to the point where predictions are emerging that the Samsung Android sales will eclipse iPhone sales!
        http://www.redmondpie.com/samsung-android-phones-may-have-surpassed-apples-iphone-in-smartphone-sales-report/

        I am wondering what clues we can use to deduce where this is all heading…

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