Search and mobile giant Google will buy Motorola Mobility for $US12.5 billion in a move that nets the company a treasure trove of patents and an increased market share that will make it one of the biggest manufacturers of Android-based smartphones in the United States and the world.
The largely unexpected move comes as tech giants Apple, Microsoft and Google are fighting over market share and control over patents, which are the catalyst for a complicated series of complaints and legal disputes about royalty payments.
Tech analysts have seen the move as a major shift for Google, which is now incorporating hardware manufacturing as well as software development. Some believe this indicates the company may move towards a more structured, universal format, rather than the “open” approach of multiple versions of operating systems, running on smartphones from a number of different manufacturers.
Telsyte research director Foad Fadaghi says it’s a “massive” acquisition, and “signifies Google’s intention of being a mobile-focused company”.
“This is outlining that their future is in the mobile space.”
“The other interesting scenario you may see is where Google starts competing with LG, HTC, Samsung and others, and inadvertently you might see a situation where they start looking at other operating systems.”
However, rivals have also welcomed the decision, with heads of Samsung, Sony and HTC praising the acquisition as an example of how Google continues to defend the Android platform. Some analysts point out this means they have one less competitor.
“We welcome the news of today’s acquisition, which demonstrates that Google is deeply committed to defending Android, its partners, and the entire ecosystem,” HTC chief Peter Chou said in a statement.
Google announced the deal overnight in a blog post, saying that it has worked with the company ever since 2008 when it launched Android as its sole operating system.
“It was a smart bet and we’re thrilled at the success they’ve achieved so far. We believe that their mobile business is on an upward trajectory and poised for explosive growth,” chief executive Larry Page said.
Motorola’s trove of patents is a key factor. With the major tech giants battling over royalties and rights, and Google recently complaining that Microsoft and Apple teamed up to outbid it for Nortel’s patents, the company now has a key bargaining chip.
“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,” Page said.
But there’s a third element to the acquisition – Motorola also manufactures set-top boxes for cable companies in the United States. Such control could give Google an outlet for its underwhelming Google TV technology, and might provide an alternative to Samsung’s new Smart TV technology.
“Motorola is also a market leader in the home devices and video solutions business. With the transition to Internet Protocol, we are excited to work together with Motorola and the industry to support our partners and cooperate with them to accelerate innovation in this space,” it said.
The acquisition comes after a troubling time for Motorola. The company split key divisions earlier this year due to poor smartphone sales, and its revenue has halved. It has tried to fight back with the release of the Xoom tablet and some well-received smartphones, but has largely failed to compete.
Some believe the acquisition has an ulterior motive.
While Google originally released the Android platform as an open software, it has slowly made changes in order to control the ecosystem as more manufacturers have created custom versions of the OS.
Motorola may be used by Google to create examples of how other manufacturers should utilise the Android system.
“It makes a bit of sense to go into a closed environment down the track because they’ll be able to make money from applications to offset any margin erosion in the hardware business,” Fadaghi says.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
