Following Google’s decision to buy Motorola we got Steven Levy on the phone to talk about what it means.Levy is a senior writer for Wired and the author of the excellent “In The Plex: How Google Thinks, Works, And Shapes Our World.”
Levy spent hundreds of hours with Googlers for his book so he knows more about the company than any other non-Googler out there.
Despite his closeness to the company, the decision to buy Motorola seems to have caught Levy by surprise.
However, he says it’s indicative of new CEO Larry Page’s love of big ideas.
Levy fully expects Google to take over Motorola, streamline the operations and produce some interesting and disruptive hardware products.
That’s right — Google will keep the crappy low-margin hardware business and try its best to make something interesting.
Here’s the full transcript of our conversation:
Business Insider: Did this catch you off guard?
Steve Levy: I wouldn’t have predicted that Google would have bought Motorola but it’s not surprising because Google likes to take big bets and make big leaps.
BI: Was there any suggestion from Larry Page or someone inside the Android division that they would want to be in the hardware business?
SL: My guess is that hardware is sometimes seen as a necessary step to get the software out there. The way this whole thing seems to be going is to protect the Android operating system, and when they began to figure out how to dig themselves out of this patent hole and as is often the case with Larry, the solution winds up to be much bigger, and encompasses some other opportunity. The way he likes to deal with a problem is to come up with a scheme that not only addresses the problem but comes up with something big in addition.
I don’t think there’s a love of hardware there but I think that besides the patent thing, they’re now enamoured by the idea of doing interesting things that you can only do if you own the hardware company along with a software company.
BI: The way we looked at it, Larry Page was talking to Motorola and was thinking about the patent thing and he’s the type of guy who gets excited and he saw this opportunity. Is that what you believe happened here?
SL: I’m sure Andy Rubin, he had a lot to do with it as well. Those wild blog items about patents indicated the company seemed to be in trouble — I don’t know what that was about if the Motorola deal was about to happen.
Certainly it’s characteristic of Larry. If he has a situation to deal with, he’ll come up with the biggest possible response because big responses and big risks is part of his makeup.
BI: Do you believe Google execs when they say, “we’re just going to leave it alone and let it be a stand alone operation”?
SL: Well, they sort of said contradictory things about it. I don’t think they said they’ll leave it alone, they said they’ll operate it as a separate entity. Why would you buy something if you intend on leaving it alone? Google’s leaders think they can do things better than things have been done traditionally so one would expect if they bought a handset manufacturer, that they would want to build better and different handsets then anyone else.
They’re not going to leave it alone but they’re not going to merge it into Android as they were saying, which would be an unwelcome development from the partners. They now have to balance the idea that the same people who direct Android are also going to be directing the people who run the handset division.
What happens when Motorola under Google has its first hit? On the one hand it would be great for Google to have a giant hit, on the other hand if it’s really a run away hit, you’d have to figure Android partners wouldn’t be happy about it.
BI: What do you think of them taking on a new company with 19,000 companies that’s been described as dysfunctional?
SL: I actually think that’s their biggest problem. When Google reached 20,000 employees, there were a lot of worries and concerns: “Look how big we are, how can we maintain our nimbleness?” Now they’re taking on 19,000 employees who aren’t chosen by their standards. Motorola has a culture of their own, a culture that certainly Google doesn’t endorse. There’s the question of how much are they going to be integrated into Google and how will Google maintain that?
I haven’t heard anything from Google, in the conference call or anywhere that it’s talking about that. That to me is the biggest problem because Google’s attempts to maintain its culture in the face of growth is among it’s highest concerns. There was already this challenge of growing from 24,000 to 30,000 this year and now it’s going to be almost 50,000 people. That’s a huge company.
BI: Does Google have the stomach to go into a town in Illinois and fire a ton of people?
SL: I think they do. Why wouldn’t Google want to make the workforce of its new company reflect its own values which would mean getting rid of some people and bringing on other people. Larry Page vets every single employee hired at Google, do you think he’s going to take on 19,000 employees and not care about how they perform or how well they meet his standards?
BI: Google has never done layoffs, have they?
SL: They’ve done it in a small way. They laid off some recruiters during the recession when they thought they would stay relatively stable for a brief period, about a year or so, and that caused big ripples. It’s a different thing to lay off people when you take on a new company as opposed to letting go of people who you’ve hired. I don’t believe anyone thinks Google wouldn’t need to streamline a workforce of a company you just bought, which is not known for being lean and mean.
BI: Shifting back to Larry Page and the strategy, do you think this is him looking at Apple which is doubling its profits year over year and almost doubling revenue on the back of iPad and iPhone sales? Do you think they can integrate like that? Do you think that’s an influence?
SL: Traditionally Google follows their own path. They don’t look at other companies and say, “Wow we want to be like that.” Even though they admire Apple, I don’t get a sense they said, “We want Android to look more like the iPhone, in terms of the business model.” I think they’re thinking, this is going to help them move forward with their Android vision.
It’s speculation but they’ve put a lot into the idea Android would be an open system with many many partners. I really don’t think the Motorola thing is something where they’re eventually going to say, “We don’t want anymore partners, we want to be like Apple.”
BI: Where does this fit into their plan then?SL: My guess is, you look at the time they did go off on their own and say to the partners, “We’re doing our own hardware.” The impetus for that was not only to create a phone with the hardware specs that their designers liked, but it was to push a different business model and that didn’t work because they didn’t get the cooperation they needed to sell these things online.
But maybe if they wanted to push a different business model, they’d be better positioned to do that with Motorola because its relationships with carriers are deeper than Google’s — the pre-existing market, channels, and things like that.
Google is a company that likes to disrupt the way business is done. I wouldn’t be surprised if Google did something like, we’re going to build this great phone and give it way and there would be some carrier deal or maybe even Google software built in, it would make it worthwhile there. What I’m looking for is, what disruptive business models or changes from the way things are done now, is Google going to implement?
Now this is a long way away. It’s another year before Google takes over the company because of reviews and things like that. This puts Google in a position to do the disruptive things they like to do.
Continue to read about how Google’s future acquisition plans will be affected by this move …
BI: Does Google have a good sense of how much the government is looking at them?SL: These antitrust issues have hampered Google. It is a huge handicap to make this deal and then wait for months or maybe even a year before you start implementing your plans. That’s a long time in this space. I think that Google’s foes by establishing this anti-trust scrutiny in everything Google does, have really hampered the company.
BI: Does this acquisition slow down any plan for more purchases from Google?
SL: If they see something that they want, if they want to go into a space, or they think they can do something different, Google will do that. Regardless of who is in the space or their relationships with people who are in that space, we’ve seen it with Apple, we’ve seen it with Microsoft and phone companies. When Google feels, hey we think we can add value or we could forward our mission, or we have to protect our mission, they go there.
BI: What is Google’s mission now?
SL: That’s a good question. Google’s mission is to not only access and organise the world’s information but more now, enable people to get that information. I said in the book, I wouldn’t be surprised if Google were to bid on spectrum in the next big auction, and believe me, this Motorola deal doesn’t make me less likely to think so.
BI: With all the patent stuff leading up to this, do you think Google will indemnify all the partners that are going to use this, like HTC and Samsung, all these guys who are facing lawsuits?
SL: Google’s invested in the Android system and it has to make sure its partners feel secure in adopting that system. I don’t know if it’s total indemnification, or if it’s just help. To me, the one thing that makes this thing go down palatably to places like Samsung and HTC, is that they’re going to benefit by Google having this patent portfolio, this protection. You have to feel better if you’re an Android developer in the patent sense that Google’s done this.
BI: Anything else?
SL: The one thing this underlines, even though Google has taken us beyond the scope of patents, the very fact of how this apparently came about, this whole business about the very importance of patents shows how perverted the system is. Even though I felt the blog post was an odd venue to push these opinions, generally you have to agree with David Drummond. The system is out of control and it’s a perversion of the reason that we have a patent system, it’s put in the Constitution, it’s there to promote progress and now we’re in a position where it inhibits progress and you just have to wonder where the next Google or the next Apple can come from if it has no patent portfolio.
BI: Sure, but what about in the case of Google where they were talking about taking Java, and they decided to just go for it without asking permission?
SL: I remember when Java came out and it wasn’t supposed to be something where if you used Java for your product you were going to have to be concerned about a patent. That was the whole point, people adopt these open systems thinking they’re open, and that you can use them. And now to find that Sun’s inventions which were publicly touted as something that’s being open and you could adopt and Google seemed to be in the spirit of that, are taken over by another company that’s filing lawsuits, seems to me to be somewhat of a perversion.
BI: One last thing, what are your thoughts on Google+?
SL: I think it’s been a success that’s even shocked Google. I think they recognise it’s early days but the thing that has Google really happy is it that it’s been so well received even before a lot of the important aspects of Google+ have yet to be rolled out. It’s in the beginning stage and people are responding to it so Google really couldn’t be happier about the launch.