Google buys Motorola to get some patents. Samsung, HTC, LG and other Android OEMs rejoice

Wow! That was quick.

I told you a couple of weeks ago about the best and easiest solution for all Android patent problems. Google should just buy Motorola.

Today Google went and did just that. They bought Motorola Mobility for $12.5B in cash. So now that the deal is done, what does it mean to Google and Android ecosystem in general?

A heck of a lot, I think. But most of it can be summed up in one sentence. The biggest threat to Android’s future – the lack of defensive patent portfolio – is now neutralized.

Yes, there are still lawsuits from Apple, Microsoft, Oracle and many others out there. But they do not matter much anymore. With Google owning a huge Motorola’s patent portfolio and wielding it as a defensive club, none of the competitors will be able to simply shut off Android devices from any market, or demand exorbitant fees. While there will still be legal maneuvering and bickering who pays who and how much, this is a normal thing in mobile and other tech industries, and companies know how to deal with that.

So HTC might end up paying Apple licensing fees due to some of the patents, but with Google/Motorola able to threaten the ban of Apple’s products due to some other patent infringements – Apple will have no choice but to negotiate in good faith. The same is true for Microsoft. It is not clear yet who’s patent portfolio is stronger – Moto’s or Microsoft’s – that will be sorted out in courts and negotiations in a few years, and we’ll have a cross-licensing deal, or one will end up paying the other a modest licensing fee. Which will be much lower then what Microsoft is demanding right now.

At this point, the one big question that remains – is Google/Oracle suit. With Oracle asserting its Java IP, and having very low exposure to mobile – where most of Motorola’s patents are – Oracle problem remains as big as it was before. Though finally seeing such a bold move to protect Android ecosystem, makes me much more optimistic that Google will find a solution here too.

With the patent threats out of the way, let’s look at the other Android OEMs and how this deal affects them. With Google now a direct competitor to Samsung, HTC and others – won’t they be heading for the hills and turning to the alternative platforms like Windows Phone?

I don’t think so.

At least not very soon. The biggest Android licensees like Samsung, HTC, Sony Ericsson and LG are probably as happy as they sounded in those canned press clips in the deal announcement. Here are some reasons for them to feel that way:

• HTC and Samsung were already kicking Motorola’s behind with their Android Phones. Despite starting at about the same time, despite having less exclusive access the Motorola – both HTC and Samsung are now selling 3 times as much Android devices as Motorola. And with Google acquisition, at least for the next 6-12 months, Motorola is now a weaker competitor then it was before. As with every big buyout – there will be a lot of transition problems slowing Motorola down. And becoming part of Google will take away at least some of the competitive drive/motivation to succeed from Motorola’s employees.
• Today, and for the foreseeable future, patents are a much bigger problem to Android OEMs then anything Google can do with additional Motorola exclusivity perks. HTC is facing a possible ITC import ban on its Android phones by the end of the year. Samsung’s Android tablet sales were already stopped in Europe and Australia by Apple. According to some reports, Microsoft, Oracle and others are already trying to extort per device fees from every Android OEM, and many of them are ready to give up and pay up. As soon as the deal closes – Google can start extending patent protection to every Android device maker.
• Google assured all OEMs that acquisition won’t change the way Android devices are developed and the way OEMs get access to the new versions of OS. Google always had one preferential OEM for each new version of Android. For 1.0 and 1.5 – it was HTC with G1 and Magic, for 2.0 it was Motorola (Droid), then again HTC for 2.1 (Nexus One), Motorola for 2.2 (Droid X), Samsung for 2.3 (Nexus S) and again Motorola for 3.0 (Xoom). Google assured that the new Motorola will operate as a separate business unit, and the preferred OEM selection process will remain the same. Some may say it’s naïve to believe that Google will remain true to these promises. But I don’t’ think so. Google has no real motivation to become a major competitor to other Android device makers… As long as those OEMs produce state of the art devices that sell well.

Are other device makers worried a bit that Motorola is now part of Google? Of course. And OEMs are looking at available alternative platforms to Android. Most likely Windows Phone.

But none of the big Android licensees, except for Motorola, had an exclusive relationship with Google. Most of them already had Windows Phones on the market and were working on the second generation devices too. Especially in light of escalating patent threats.

And no matter what preferential treatment Motorola may get as a subsidiary of Google, the benefits of early access to the new versions of Android are overrated. Yes it is good to have it, and, if you are lucky, you can get a few months of free reign as Motorola had with Droid, or HTC with Desire. But that’s about it. You also have to have a great manufacturing capabilities and distribution network, otherwise few months lead won’t help you much. As the success of Samsung Galaxy S and HTC phones clearly shows.

Except for USA, Latin America and China – Motorola’s distribution power is very weak. And Google is not well liked in China too. So the possibilities for Google/Motorola becoming a major competitor to HTC or Samsung is basically non-existent in the short term. In the long term – it would require some huge investments that Google has no incentives to make.

Much more likely scenario is for Google to run Motorola as a separate business unit for a year or thereabouts, for political/PR reasons, and then sell it to someone willing to get into a worldwide smartphone game. Keeping all the patents and (maybe) a team for its Nexus line.

As for now – Android patent threat is more or less neutralized, and Google as a direct competitor is an unlikely threat in some distant future. I think everyone in Android camp, including Samsung, HTC, Sony Ericsson, LG and other OEMs are very happy today.

Brilliant deal. That Nortel patent auction, where Apple and Microsoft spend $4.5B just to keep it out of Google’s hands seems pretty pointless now. Larry&Sergey must have been laughing their pants off, bidding pi and stuff while on Nortel, while working preparing to snatch Motrola

 

If you liked the post, you might find these interesting too:

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• Android is patently ill. Two strains of IP disease that may soon derail Google’s OS
• Motorola smartphones banned in Germany following ruling on Microsoft patent

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