The big news in tech today was of course Google’s acquisition of Motorola Mobility. Google dipped into it’s roughly $39 billion in cash and agreed to pay $12.5 billion (or $40/share) – a 60+ percent premium over Friday’s close. You can read some of the coverage here: Google’s blog post on the acquisition, TechCrunch, TechCocktail, Forbes and TheVerge.
It is an interesting acquisition given Moto was already all-in on Android. The implicit assumption is that Google can more effectively run what was already the equivalent of their mobile hardware business internally. Initially I didn’t really see this as patent acquisition despite acquiring 17,000+ patents (and other 7K+ pending), but here is what Google wrote on their official blog:
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.
TechCrunch quotes Citi analyst Mark Mahaney in calling the acquisition “defensive and here is what Android partners have to say about the acquisition. TheVerge also wrote about Google’s newly acquired patent pool so clearly besting the competition through a large patent pool is an important dynamic to this acquisition.
Here are a few things that haven’t yet received much attention:
The acquisition gives Google tremendous distribution which is something Google has lacked. As TechCrunch points out, once the acquisition clears, Google will instantaneously become the #2 Android hardware vendor. Distribution is one of the key elements
to hardware partnerships. The new found distribution will help Google push out new devices without having to rely
solely on partners. With this, I suspect Google will use this new hardware division (and accompanying distribution) to
make a big push into tablets – a market which Android hasn’t yet been extremely successful in penetrating.
Despite this new distribution, it sounds like Google will remain committed to their Nexus strategy for the foreseeable future . Given the acquisition and the need to placate their other hardware partners, I suspect the next Nexus device will not be a Moto device.
A final area where little has been said is the set-top box business of Motorola Mobility. Last month Logitech (a key Google TV hardware partner) announced sales had been dismal. Logitech even announcing more boxes were being returned than sold (see here and here). Logitech also subsequently dropped the price to $99 – more in-line with the “other” TV box out there. The Moto
acquisition might allow Google to breathe new life into their TV ambitions.
Much of the chatter today went back and forth on whether this was a hardware transaction or a patent pool transaction. What this discussion subtly misses is that platforms require a hardware core. This is something I’ve talked a lot about over the last year. The current platform discussion has focused on software (Android v. iOS v. Other), but this fails to see the role hardware plays in developing the ecosystem of a platform. As you look through the history of platforms, hardware is at the core. Through this acquisition, Google ensures the hardware core of Android is secure.
