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

 

Author: Stasys Bielinis

While I like to play with the latest gadgets, I am even more interested in broad technology trends. With mobile now taking over the world - following the latest technology news, looking for insights, sharing and discussing them with passionate audience - it's hard to imagine a better place for me to be. You can find me on Twitter as @UVStaska'

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  • Micah Chiri

    You are a brilliant man Staska. Almost as brilliant as Larry&Sergey.

  • http://www.mobileinfoplanet.com MIP

    Great summary, you pretty much summed up (but much elaborated) my own take on the matter:

    http://www.mobileinfoplanet.com/2011/08/15/a-great-day-indeed-for-us-smartphone-lovers/

    Again, congratulations on your prediction – you nailed it!

  • http://siliconexus.com/blog Bill Houle

    If Samsung starts to get worried about their market standings with their new GOOG+MMI competitor/cooperator, they have a Bada ace up their sleeve. I think this would be a good opportunity for LG or HTC to invest in what remains of Nokia in the guise of strengthening their WP7 relationship, though secretly they would be acquiring Meego for their own fallback plan.

  • http://twitter.com/chenetic Eric Chen

    I’m going to follow you from now on.

  • Anonymous

    I think you are viewing things too closely through the Google Reality Distortion goggles! Google has, and will, always act in its own self interest. Always! It is extremely doubtful that they will extend any patent protection to other Android OEMs given their track record to date. If anything, their acquisition of Moto (MMI) just opens them up directly to Patent litigation.

    As to Motos’ current litigators, both are suing for different objectives;

    Microsoft: for proper FRAND consideration, and to extract licensing fees.

    Apple: to bar Moto devices altogether, or, failing that, to seriously impair usability/functionality!

    [and if acquired by Google] Oracle: for a huge infringement payout, a percentage of the business, and per device royalties.

    So, irrespective of their intended acquisition of Moto (or despite it, OR, dute to it) going forward, the Landscape of Android WILL change in the near future!

  • Ian

    I’m interested to hear your thoughts on why Google wouldn’t want to get into the hardware game. 

    Admittedly Apple may be the only company to get hardware + software right, but isn’t it worth a shot for Google to try and get it right too?  In Apple’s last quarter, it did $28B in revenue with a 25% net margin.  $19B of the revenue came from iPhone/iPad, so if that group also generated 25% net margins, that’s $4.75B in profit.  Google’s entire net profit from the quarter was $2.5B– almost all of that from advertising.  Yes, Google can monetize Android through advertising, Google wallets, etc., but there’s a strong financial case to be made that it can make far more from selling its own phones/tablets.

  • OpenMind_Universe

    Google acquired Motorola to PROTECT Android OS.
    Google acquired Motorola to PROTECT Android vendors.
    Google acquired Motorola to PROTECT Android OSP, the world’s largest *open*-source project.
    Google ISN’T interested in ANY specific manufacturer of smart devices.Google ISN’T interested in ANY unhealthy preferences for ANY specific manufacturer of smart devices.Google needs Android continuing to dominate and grow. Safely.Google needs in-house hardware to test Android new versions, new features, new hardware components.Google needs growing, SUCCESSFUL and protected from aggressive attacks, Android vendors.

    Android vendors and Open Handset Alliance partners HTC, SAMSUNG, Motorola, SonyEricsson, LG, Toshiba, ASUS, ACER and other will just continue to do what they do the best: differentiate themself through design and Android skins (like HTC SENSE, SAMSUNG TouchWiz, Motorola Blur, SonyEricsson new NOZOMI-like skin and other) making the best smart devices, creating enormous choice and possibilities for happy CUSTOMERS.

    It’s the greatest move by Google so far, grabbing one of the most solid mobile players in tech history, Google gets incredible portfolio of 17,000+ mobile industry patents and 7,500 patents in progress (24,500 patents), its tech labs, hardware design skills and brand.

    Android FTW!

  • gerrr!

    Staska, you were 100% right.  I didn’t believe it at the time, but wow, you were absolutely spot on.

  • http://entertainment-lobby.blogspot.com Akif

    I’m going to follow you from now on.