Okay, it’s official – but now what? When Google CEO Larry Page first broke the news of the $12.5bn acquisition of Motorola Mobility back in August 2011, the instant reaction was that the Android owner was merely after Motorola’s vast hoard of mobile patents. With 17,000 mobile patents with another 7,500 pending, Google could use these to defend the Android operating system and its OEM partners from patent lawsuits from competitors.
Speaking during a conference call the day after the deal was announced back in August 2011, Google CEO Larry Page said:
“I think there's an opportunity to accelerate innovation in the home business by working together with the cable and telco industry as we go through a transition to Internet protocol. Motorola also has a strong patent portfolio which will help protect Android from anti-competitive threats from Microsoft, Apple and other companies.”
And there were a few more “ands” from Page, including a second reference to “protecting” Android:
“And I'm really excited about protecting and supporting the Android ecosystem… And we really believe that Motorola Mobility has tremendous opportunity for growth and will really create a lot of value in the future… And we really believe in the plans of the Motorola team, Sanjay and their vision for the future and really expect them to be successful.”
Unfortunately for Sanjay and the Motorola team, they are not going to be part of this vision for the future. Yesterday, Page announced that Motorola Mobility CEO Sanjay Jha has “stepped down” as CEO, to be replaced by “long-time Googler” Dennis Woodside. Ex-Qualcomm executive Jha had mixed success in spinning off the mobile business from Motorola – you could argue that his biggest success was recognising the value of the patent portfolio (a skill surely learned at patent supremo Qualcomm) and orchestrating the sale to Google.
Woodside, meanwhile, is described by Page as “an Ironman triathlete” (not to be confused with ‘a narcissist with too much spare time’ or ‘a wannabe Tony Stark’ – although Google is well on its way to become a real-life version of Marvel’s Stark Industries…). He comes with almost ten years experience at Google, most recently as President of the Americas region.
Both the European Commission and the US Department of Justice approved the deal back in February. The Chinese authorities waited until last Saturday. Joaquin Almunia, VP in charge of competition policy at the EC, said of the decision:
“We have approved the acquisition of Motorola Mobility by Google because, upon careful examination, this transaction does not itself raise competition issues.
Of course, the Commission will continue to keep a close eye on the behaviour of all market players in the sector, particularly the increasingly strategic use of patents.”
The Department of Justice's Antitrust Division gave its reason for approving the deal in a statement:
“After a thorough review of the proposed transactions, the Antitrust Division has determined that [the] acquisition is unlikely to substantially lessen competition… The division concluded that the specific transactions at issue are not likely to significantly change existing market dynamics.”
The Chinese antitrust and competition authorities approved the deal last Saturday, so with the last obstacle cleared, the deal could be official closed. But according to the Associated Press, the Chinese regulators attached a hefty condition, insisting that Android remains open source and available to all OEMs at no cost for the next five years. That should pacify its domestic handset makers. The length of time taken by the Chinese regulators, and the five-year stipulation, was likely due to the strained relationship between Google and the Chinese government – Google quit its operations in China a couple of years ago over censorship and security concerns.
But does Google have bigger plans for Motorola? Here’s what Larry Page said yesterday:
“Motorola is a great American tech company that has driven the mobile revolution, with a track record of over 80 years of innovation, including the creation of the first cell phone. And as a company who made a big, early bet on Android, Motorola has become an incredibly valuable partner to Google.”
Don’t under-estimate the value of the patent hoard, and Page’s desire to protect the Android platform from legal attacks. But just how serious is Google about running a phone manufacturing business (leaving aside the threat this could theoretically pose to other Android OEMs)?
Putting a non-mobile executive in charge is a very risky move, especially as so many of his core team are also new hires, many without handset experience. Woodside, apparently, started his career as a lawyer, so that plays into the patent theory. But Motorola Mobility is not just a handset company, it also operates in the cable box space – another way to bring Google into our lives. It would certainly be a much-needed boost for Google TV.
Perhaps Google will use Motorola as a preferential partner, launching new versions of Android ahead of other OEMs, as an extension of its Nexus programme? That wouldn’t go down well with the other Android supporters.
Or maybe Google sees the vast profitability chasm between Apple and Samsung and the rest of the mobile device manufacturers. It may well ask, ‘how come Apple and Samsung accounted for 99 per cent of mobile device profits last year?’, and be tempted to restructure Motorola to copy the business model of Apple and Samsung. Woodside surely won’t be content with running Motorola on a zero net profit margin? But good luck to him if he tries to fix this – as very few others have succeeded recently in pulling off this feat.
If he fails, Google could sell off the company. Otherwise, Google will be left with a failed business – and how many times have we seen expensive acquisitions fail to integrate with the parent company and wither and die? It’s not easy, and certainly shouldn’t be seen as a given.
Our opinion? It’s 50:50. Either they get this venture to work and both Google and Motorola Mobility benefit (one plus one equals three), or it proves to be a complete disaster, and Motorola’s share of the handset market shrinks even more. We don’t believe there’s much of a middle ground. Good luck predicting which future scenario is most likely. Last word to Page:
“It’s a well known fact that people tend to overestimate the impact technology will have in the short term, but underestimate its significance in the longer term. Many users coming online today may never use a desktop machine, and the impact of that transition will be profound--as will the ability to just tap and pay with your phone. That’s why it’s a great time to be in the mobile business.”
For more background to the deal, read TelecomTV’s earlier report here.
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