Google buys motorola mobile business

[Kali Yuga]

Originally Posted by Penforhire

I do think the big winner from this move is Microsoft.

Maybe, although let's face it, MS has a terrible record in the mobile space....

[Ankh]

Originally Posted by Penforhire

It all depends on what they do with it. If Google rolls out a lot of new phone hardware their partners will fade away to other platforms. Not as if HTC can't make phones for WP7. I do think the big winner from this move is Microsoft.

Microsoft, the proud owner of late Nokia's assets?

That would be a refuge from the Google's unfair business practices, if there ever was one...

[RockdaMan]

He also said that while he didn’t expect any manufacturers to stop making Android devices, some might make fewer of them, perhaps finding new virtues to Window Phone 7 and WebOS. “HTC in particular,” Bajarin said, “wanted to buy WebOS” before HP ended up with it.

http://staging.spectrum.ieee.org/ris...ine-into-water

[GreenMonkey]

Originally Posted by Andrew H.

I suppose it depends on your definition of "platform"... but JVC licensed VHS technology *and* competed with licensees. I think that this is pretty comparable to what Google is trying to do, particularly as Android is (more or less) an open standard. As was VHS; Palm and Apple were not.

And IBM? Did someone forget about the IBM PC and its various clones? Sure it started out with backwards-engineering, but later they might tons of money on licenses while also building PCs. Geez.

http://en.wikipedia.org/wiki/IBM_PC_compatible

And the relevant quote:

"As the market evolved, however, despite the failure of MCA, IBM derived a considerable income stream from license fees from companies who paid for licenses to use IBM patents that were in the PC design—to the extent that IBM's focus changed from discouraging PC clones to maximizing its revenue from license sales. IBM finally relinquished its role as a PC manufacturer in April 2005, when it sold its PC division to Lenovo for $1.75 billion."

[stonetools]

Google is swinging for the fences on this one. I think that they are bowing to the logic that in the end, the best way to optimize end user experience in the mobile space is an integrated hardware/software/app store solution, a la Apple and RIM. I expect that Microsoft will see the logic too and eventually acquire Nokia.

[Dave_S]

Originally Posted by stonetools

I expect that Microsoft will see the logic too and eventually acquire Nokia.

The market seems to agree with you!
Nokia stock went up nearly 18% yesterday!

[HansTWN]

Google will probably sell off the hardware business later. Or they could turn it into a Nexus-making testbed. Though that would be quite wasteful. Anyway, the hardware business just doesn't fit within their company and keeping it will only hurt their standing with Samsung, HTC, and others. That could be a factor once HP starts licensing out WebOS or these companies could drift over to Windows Phone 7.

[tubemonkey]

Originally Posted by HansTWN

Anyway, the hardware business just doesn't fit within their company and keeping it will only hurt their standing with Samsung, HTC, and others. That could be a factor once HP starts licensing out WebOS or these companies could drift over to Windows Phone 7.

Fat lot of good it'll do them. At best, webOS and WP7 will be minor players in the mobile market. So if they'll be satisfied with selling fewer phones, then by all means they should jump ship.

[afa]

As beneficial as it may be for Google to own a hardware business (giving it a significant source of revenue other than its current advertisement-dependent model), it seems that the acquisition of Motorola's sizeable patent portfolio is a major (perhaps even the major) reason for the deal.

Here's what Larry Page said:

We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to "protect competition and innovation in the open source software community" and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.

And regarding how this will affect other manufacturers who have adopted Android:

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.

And the reaction from others is not too bad so far, though it is weirdly similar. Is Page having them read from a teleprompter?

Peter Chou, CEO, HTC:
We welcome the news of today's acquisition, which demonstrates that Google is deeply committed to defending Android, its partners, and the entire ecosystem.

Bert Nordberg, President & CEO, Sony Ericsson:
I welcome Google's commitment to defending Android and its partners.

Jong-Seok Park, President & CEO, LG:
We welcome Google's commitment to defending Android and its partners.

J.K. Shin, President, Samsung, Mobile Communications Division:
We welcome today's news, which demonstrates Google's deep commitment to defending Android, its partners, and the ecosystem.

[murraypaul]

Originally Posted by HansTWN

Google will probably sell off the hardware business later.

The problem with selling it is that wouldn't get back anywhere near what they paid (as the main value is patents, and they paid a significant (60%+) premium over market price), and would have to book a loss on that. Take away the patents and the cash, and how much is the Motorola handset business worth?

[HansTWN]

Originally Posted by murraypaul

The problem with selling it is that wouldn't get back anywhere near what they paid (as the main value is patents, and they paid a significant (60%+) premium over market price), and would have to book a loss on that. Take away the patents and the cash, and how much is the Motorola handset business worth?

My thinking is that they made the deal for the patents ONLY. Selling the hardware business to some Chinese company (who desperately wants the development know-how and marketing connections --- to Verizon, etc --- and gets government money for the deal) would recoup a significant part of what they paid for the whole company in the first place. At the same time they would get rid of the headache of running a business based on selling hardware (not their thing at all) and maintain a good relationship with their current partners. Let us face it, if they keep making phones and tablets it is a catch 22. If they do well and make money, then their Android partners won't be happy. If they don't, why keep it?

So even if no low-end phone manufacturer is willing to pay a good price perhaps HTC, LG, or Samsung would? In the end, anything they can get for the hardware part would be a good deal for them.

[HansTWN]

Originally Posted by afa

And regarding how this will affect other manufacturers who have adopted Android:

And the reaction from others is not too bad so far, though it is weirdly similar. Is Page having them read from a teleprompter?

That is exactly what I thought. Then again, they have to keep calm and see how this plays out -- putting a happy face on seems like a good idea. No matter what they are really thinking.

[HansTWN]

Originally Posted by tubemonkey

Fat lot of good it'll do them. At best, webOS and WP7 will be minor players in the mobile market. So if they'll be satisfied with selling fewer phones, then by all means they should jump ship.

Let us just say Samsung and HTC stopped making Android phones and switched to WP7. Do you really think Android would still be going this strong? Just with Motorola, SE, and LG phones? And my money is on the MS + Nokia team making a pretty good showing in late 2012 and 2013. Perhaps not in the US, but worldwide. Though MS connections will help Nokia in the States.

[murraypaul]

Originally Posted by HansTWN

My thinking is that they made the deal for the patents ONLY.

I agree. (Although they might also see some value in being able to release what would essentially be reference design devices)

Selling the hardware business to some Chinese company (who desperately wants the development know-how and marketing connections --- to Verizon, etc --- and gets government money for the deal) would recoup a significant part of what they paid for the whole company in the first place.

But what is a significant part?
Before the offer, the market valued the business at about $7.5Bn.
The company had $3Bn in case, which leaves about $4.5Bn for the value of the patents and hardware business.
Strip off the patents, and how much is the hardware business going to sell for?
Now compare that to the $12.5Bn Google is paying.

In the end, anything they can get for the hardware part would be a good deal for them.

In the real world yes, in the world of accountancy maybe not. Google would have to book a multi-billion dollar loss on the sale.
I'm not saying it doesn't make sense, but it could look really ugly on the books.

[HansTWN]

Originally Posted by murraypaul

I agree. (Although they might also see some value in being able to release what would essentially be reference design devices)

I mentioned that earlier. But in the end they are releasing reference design devices with their partners now --- see Nexus 1 and S, Motorola Zoom. Would be quite a waste to keep the whole hardware business just for that. And they would have a real loss making division on their hands, if they were doing just that.