As Google continues the arms race for mobile patents (it just picked up another 1,200 from IBM), the dust has yet to settle following Google’s proposed $12 billion acquisition of Motorola Mobility.
Business Insider Research talked to Mobile industry veterans to get unvarnished insights into to the deal with the hope of making sense of an acquisition that has left many–both in the industry and in the investment community–scratching their heads.
Some common threads:
- Gaining control of Motorola’s 17,500 patents and 7,500 applications was the main (most said sole) driver for doing the deal.
- While there were a few contrarians, the consensus of those we spoke to was that Google has no business being in the handset business and will spin off the Motorola hardware business sooner rather than later.
- If Google does decide to keep the hardware manufacturing business, running the combined company will be extraordinarily challenging.
- Google will share the patents with their OEMs (Samsung, HTC, etc.) so that THEY can battle Apple instead of Google having to take them on directly.
Here are a series of quotes from some of those we spoke to that hopefully shed some light on what those in the industry really think of the deal. The interviews included a senior level executive at a Google OEM, the founder and head of a mobile ad network, a veteran Silicon Valley investment banker, and a division head at a consumer electronics company.
MOST STILL THINK THE SOLE REASON GOOGLE BOUGHT MOTOROLA WAS TO GET THE PATENTS:
“As the handset moves from a utilitarian device to call people to an extension of their personality, Motorola certainly has not kept up with others in the space, so it must be about something other than the handset,” observed a founder and CEO of a mobile ad network. “Do these patents allow them to do something in mobile search, display or social graph that they simply can’t do without them. It has to be a means to an ends; Maybe they allow Google to give away free phones on a scale unimaginable before and make it up through huge premiums charged to advertisers.”
“The quantity (17,500 patents and another 7,500 applications) and quality of the Motorola patents are very good and we heard they were worth over $5 billion in their own right,” said a Silicon Valley investment banker who has done work in the space. “We also heard that they are of a better quality than Nortel.”
MOST AGREE GOOGLE WILL ULTIMATELY SPIN OFF THE HARDWARE BUSINESS (LIKELY SOONER RATHER THAN LATER)…
“I don’t think anyone at Google or in the industry really thinks that acquiring the Motorola hardware business was the purpose or goal of this transaction,” said a senior executive at a Google OEM. “The hardware business is not easy and they have not been in it and do not have the skills and experience needed to succeed. Motorola is a much smaller player in the hardware business when compared to HTC and Samsung.”
“I have dealt with this Motorola group and culturally they are very different from Google so integration may well be harder than they imagine,” said a division head at a consumer electronics manufacturer. “There is a lot of rigour needed in the high volume low margin smart phone hardware business which may not sit well with Google’s approach to date.“
BUT SOME THINK LARRY PAGE WON’T BE ABLE TO RESIST KEEPING THE HARDWARE BUSINESS TAKING TAKE ON APPLE HEAD ON IN INTEGRATED GADGETS…
“Google did this deal to compete with Apple,” said the consumer electronics division head. “Apple makes the best smart phones and they do this by having complete control over the product, hardware, software and apps. The Motorola group gives Google the missing hardware capability.” He went on to say: “Contrary to popular opinion, Google can be competitive in the highly competitive consumer electronics business because they already control and own the hard bits, [software platform, app store, brand] so adding the hardware should be a smaller step.”
THERE IS A RISK THAT GOOGLE WILL ALIENATE THEIR EXISTING (MOSTLY ASIAN) HARDWARE LICENSEES, BUT MOST THINK THE DEAL WAS DONE TO HELP, NOT HURT GOOGLE OEMs…….
“Google believes that all the patent suits are damaging the ecosystem and they viewed this as a way to help their partners and the mobile ecosystem,” said the Google OEM senior executive. “While the deal came about very quickly in the weeks following the Nortel deal, Google communicated their intentions to their partners in advance and we’re not angry about it–it is actually a good thing.“
HOW IT WILL HELP GOOGLE OEMs…..
“All these patent suits are a huge distraction and the goal with acquiring these patents is to put the litigation to rest,” the google OEM partner said: “Google will not take on Apple directly, but rather arm their OEMs with patents so they can better do so themselves.”
Google appears to be already being doing just this. In the last month, Google transferred to HTC nine patents it bought in the past year from companies including the former Motorola Inc. and Openwave Systems Inc. Taiwan-based Google OEM HTC used those patents last week in a new lawsuit that escalates its patent battle with Apple.
This post was published as part of BI Research, a new industry intelligence service from Business Insider. BI Research provides real-time research and analysis on the technology industry. The service is currently in beta and is free. To learn more and sign up, please click here.
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