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The perils of licensing to your competitors

Aug 15, ’11 12:02 PM
Author Categories Industry

Google’s acquisition of Motorola is clearly designed to be an acquisition of Intellectual Property rather than an entry of Google into the phone business, but the impact on the business will be felt in many ways.

It is surely going to send some Android vendors scrambling. The situation is not without precedent however. The history of governance and ownership of Symbian shows how the licensing of platforms by licensor competitors leads to unintended consequences.

Symbian was formed to be governed in a way very similar to the original Android via the Open Handset Alliance. The company was owned by a consortium of phone vendors.[1] The shares were not equally distributed however with Nokia holding a larger share (though not a majority).

Although nominally involved in decision making, the smaller shareholders never felt entirely comfortable with the arrangement and over time some sold their shares and left the group even though they continued to license the OS.

Eventually Nokia ended up acquiring the company outright and open sourced the code. However, by then the product was obsolete and the only licensee was Nokia itself.

The lesson (and warning) was that a licensor that is also a licensee makes other licensees uncomfortable. The supplier is also a competitor. This is classic channel conflict and never ends well.

Open or not, with or without equity, these arrangements are always unworkable.

So Google’s promise that

“This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences.”

seems naive at best.

—

Notes:

  1. Before its outright purchase by Nokia in December 2008, Symbian Ltd. was owned by Nokia (56.3%), Ericsson (15.6%), Sony Ericsson (13.1%), Matsushita (10.5%), and Samsung (4.5%). The company’s founder shareholders were Psion, Nokia, Ericsson, Panasonic/ Matsushita and Motorola. Motorola sold its stake in the company to Psion and Nokia in September 2003. Psion’s stake was bought by Nokia, Matsushita, Siemens AG and Sony Ericsson in July 2004.
  • http://twitter.com/bengottlieb @bengottlieb

    Palm and Apple (with the Newton; remember the Tarpon?) both had extremely poor showings with licensing their OS. Palm had initial success (notably with the Sony Clie), but other vendors gave up as Palm encroached into 'their' segments. Should be interesting to see if Google can learn from their mistakes.

  • http://www.tablazines.com Tablazines

    Competing against partners that are licensing your technology is never a good thing. All we need to do is look at the Zune and what happened with the whole "play for sure" thing as one of the most recent examples.

    • asymco

      The move to Zune was also a last ditch attempt to stay in the music player (and hence music distribution) business.

      Now why would Google "pull a Zune" if they are at the top of their proverbial game with Android?

      • tabulatech

        i don't think this comparison applies here. This purchase is about IP and IP only. i don't think it can be compared to a last ditch effort to stay in the mobile business as clearly android market share is not as insignificant as MS' was in the music business.
        in addition, Google can also get the licensees to go along with that strategy, because finally they have the IP porfolio to fend off the lawsuits. Google may get its new competitors to overlook the competition aspect of this buy for the stability and longevity of the platform.

      • http://www.noisetech-software.com/LoanPay.html Steven Noyes

        But that only works when you don't have other options. That is far from the case here. HTC may give WP7 a closer look. Sammy may very well double down on making their budding Bada very competitive.

        If this was only "about IP", Google could have paid MMI for all of their patents only. Why pick up the handset business as well. Pay MMI for all the patents and keep out of the business of making hardware.

      • ScottyRad

        I don't believe this is only going to be about IP as well given their previous Nexus devices and their statements that this will "supercharge" Android.

      • Tom Ross

        Look, Motorola is currently not competitive. They were early in the Android market and have now clearly lost against HTC and Samsung, with SonyEricsson and LG nipping on their heels. Google either needs to turn their hardware business around by giving them preferential treatment, or they need to shut it down.

      • capnbob66

        Moto is not competitive not because of their smartphones which have had their share of hits and misses but the overall state of their business including the legacy dumbphones and their corporate structure that was based on being a much bigger company. Early Android adoption may have been the only thing that saved them. This deal means that they can continue to weather the storm of their restructuring, though Google has to be careful not to alienate their bigger licensees. It seems to still be up to Moto to save itself, but it now has more time to do it… and all for the price of their patent library. Not a bad deal for them, not sure about Google though.

      • FalKirk

        "i don't think it can be compared to a last ditch effort to stay in the mobile business as clearly android market share is not as insignificant as MS' was in the music business."-tabulatech

        I'm not so sure, tabulatech. Perhaps Google's position today is more akin to Microsoft's position in 2005 than we think. It's true that Android has more market share than playsforsure ever did, but does it have more profit share? And isn't that what really matters? And Android faces a rapidly escalating patent Armageddon that playsforsure never had.

        Google knows better than any of us how much (or how little) profit they are making from Android. They may be just as desperate to stay in the mobile business today as Microsoft was to stay in the music business in 2005.

      • Yowsers

        "…because finally they have the IP portfolio to fend off the lawsuits."

        That's too early to say. MMI's portfolio hasn't stopped MSFT or AAPL from coming at them. Until we start seeing court rulings on claims and patent validity, judgments sustained or settlements, we won't know how strong it really is.

        GOOG needs *something* – question is, is it enough?

      • Lava

        @tabulatech

        Your argument that this is about IP and IP doesn't pass the smell test.

        Motorola's IP did not stop Microsoft from filing suit.

        Motorola's IP did not stop Apple from filing a countersuit.

        Motorola's IP will not affect Skyhook's lawsuit with Google.

        And Motorola's IP will do nothing to help Google in the Oracle lawsuit, which looking like it will be a slam dunk for Oracle about Google's willful infringement of Java.

      • poke

        There's only one reason I can think of. Google knows it's about to lose the Oracle suit and has to essentially dump its current platform for a non-infringing, incompatible one. It thinks it can't make that transition with its partners. Maybe the numbers don't work out on that theory (wouldn't Oracle be willing to collect royalties that would amount to less than $12 billion?). But it's difficult to see why Google would "pull a Zune" if it wasn't on the ropes in some respect. Because of the nature of Android, Android can be at the top of its game without Google being at the top of its game.

      • handleym

        We've heard the IP story. How about another angle on this?
        Google, just like Apple, can hardly be very pleased at the ON-GOING sloth and stupidity of the cell companies as they both see their vision crimped and curtailed. To what extent does Motorola have the ability to change this? Do they sell goods or services to the telcos, and thus have any leverage over them?
        I don't know anything about this market — I just throw it out there as an alternative aspect of the acquisition, one which puts Apple and Google on the same side rather than as competitors to the death.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        Interesting question (To what extent does Motorola have the ability to change this [sloth and stupidity of cellular networks]?) but you gave your own answer (in the form of a question), I think: Do they sell goods or services to the telcos, and thus have any leverage over them?

        Motorola is one handset vendor among many, and I don't think it or Google or the two combined have leverage over the mobile telcos. At any rate, I don't think Moto adds anything to what little leverage Google might have.

  • http://twitter.com/gilzino @gilzino

    Good analogy. What's Google's end game here? Perhaps Google sees control of the handset as the way to get back to their original vision of carrier-less or carrier-independent phones/mobile computers?

    • Hamranhansenhansen

      That was not Google's original vision at all. That is Apple's vision. That is why iPhone is sold at Apple Stores with zero carrier software on it. Google's vision was to prevent Microsoft from extending their operating system monopoly from PC to mobiles and shutting Google out of mobile ads. That is why Android has replaced Windows Mobile on the same exact devices from the same exact handset makers and carriers.

  • Broadway

    Arrogance, wealth, and paranoia make for a scary combination. The last paragraph of Google's news release reiterates its view that Apple and Microsoft and unnamed others are out to get it. It sees this acquisition as enhancing competition.

    • Tom Ross

      This _could_ turn out to become the most disastrous acquisition since the Time Warner AOL merger.

    • FalKirk

      Just an aside, but it amazes me that Google has to gall to continue to label the efforts of Microsoft, Apple and others to defend their intellectual property as "anti-competive" while, at the same time, they giving away FOR FREE an Operation System that directly competes with those companies and which appears to have been built, at least in part, on the intellectual property of those companies.

      I guess if you're going to lie, the key is to make the lie a very big one.

      • Hamranhansenhansen

        If you are trying to get away with being anticompetitive, the best thing you can do is call everyone else anticompetitive.

  • Pekka

    Horace, quick and crisp analysis. Your prediction also sounds rational. Sometimes big players don't however act rationally, either driven by management's ego or anticipated expectations from stock market. What's your take on how Microsoft will act? Join the bandwagon??

  • Eric

    I'm sure Microsoft are keeping a careful eye on how Google manages the Motorola acquisition, after all it could be Microsoft buying Nokia next.

    It does make me laugh when Google try to maintain how open the Android platform is, even though they're at risk of violating the GPL2 licence having not distributed any Honeycomb source code, and their development is performed behind closed doors with very occasional mass code drops. If Google really wanted to be open they could take a look at other open source projects, including MeeGo.

    • http://twitter.com/aegisdesign @aegisdesign

      Much as I agree about open source software, MeeGo is hardly a shining example of getting product out the door.

    • av500

      Google has published all the parts of Honeycomb that is has to, namely all the (L)GPL parts. The major part of Android is Apache licensed and Google can release it as it pleases them

      • Adam

        I don't know what's going on with Honeycomb, but I keep hearing things about the the GPLv2 license. Any thoughts on this? http://fosspatents.blogspot.com/2011/08/most-andr…
        http://fosspatents.blogspot.com/2011/08/most-andr…

      • Ravi

        Let's just say that if you take that post seriously, you should remember that you can substitute Android vendor -> Apple, Linux -> WebKit. and GPL -< LGPL (which differs on what source code you have to release, but not on how you have to do it).

        Apple has a very, very similar issue with LGPL compliance (they don't post anything until someone makes it a sufficiently high-profile public issue, often 2-3 months after the corresponding iOS release). If Florian's hypothetical reasoning is realistic here, the other WebKit developers own Apple. This is particularly true because some of those other developers are named things like "Nokia" and "Google", so they'll have much less trouble demonstrating damages than a random Linux kernel contributor would.

        Practically speaking, this Groklaw post (from an actual SFLC board member, albeit in his personal capacity) should set things straight: http://www.groklaw.net/article.php?story=20110815…
        The short version is "both the Software Freedom Conservancy and the Software Freedom Law Center are on record as saying they have never sued (nor do they intend to sue) any party that will respond to a phone call." [with source code, naturally]

      • EWPellegrino

        I'm not sure that it matters whether the contributor can demonstrate damages, copyright violation (at least in the US) has statutory damages.

        You make a good point though regarding webkit.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        Any truth to the stuff I've read that Google has tried to launder GPL2 code with the Apache license?

      • EWPellegrino

        From a very cursory reading the answer is perhaps both yes and no. Google seems to have copied some headers and changed the license on them, in much the same way that they took some Java APIs and copied them.

        However there is an argument which Google has put forward for (part) of their defence in Oracle's copyright suit – that API information itself is purely functional and thus not copyrightable. If correct then they could take a header, strip out the comments and variable names leaving only function names and call signatures – and that would not be copyrightable material.
        http://fosspatents.blogspot.com/2011/08/googles-n…

        I'm not going to claim to be expert here though, so if somebody is and cares to reply I happily defer to them.

    • Hamranhansenhansen

      The most successful mobile open source project is WebKit. It's on more handsets than Android, and WebKit code is available every night. And without WebKit, there would be no HTML5 browser on a mobile yet. The whole modern smartphone thing would be total fantasy without WebKit. Since Google is a user of WebKit, they certainly don't have to look far for inspiration on how to run an open source project if open is their goal.

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  • George Bailey

    You can bet that Microsoft execs are already booking flights to go pitch the other handset makers. If they are successful, say goodbye to Android dominance.
    This is a quite risky move on Google's part, and they must know that. Risky moves are often borne of desperation and fear. Things may not be too rosy back at google HQ.

    • Hamranhansenhansen

      Of course things are not rosy. Motorola was threatening to sue all the other Android licensees for patent infringement, and Google just had to spend over 2 years of their entire corporate profits to buy an unprofitable mobile maker that has been on sale for over a year and nobody bought it.

      Google is crowing about Apple and Microsoft and patents, but Motorola was the one who put a gun to Google's head about a month ago and this is the result: total capitulation by Google. They bought every share of Motorola at a 60% premium.

      Anyone who tells you this Motorola purchase was good for Google in some way is just spinning. It's ludicrous. They were absolutely mugged by Motorola, their own Android licensee.

  • Brian

    Could be that Google recognizes the profitability of owning the OS and the hardware, as Apple does, and wants to capture some of those profits.

    • asymco

      I would hope they did seek out a hardware as a way to profit from software and services business model, but I seriously doubt it. Both Google and Microsoft see hardware as the worst possible business to be in.

      If they switched to a hardware model they'd be starting with a 4% share in the smartphone business (from a 50% platform share). It's a very tough sell.

      • Joe_Winfield_IL

        It works for Apple! But seriously though, there's no way Google is ready to make this work. The pieces, in the right hands, could create something brilliant. If Google had the fortitude to eschew its OHA partners over time while building up a formidable portfolio of hardware, Android could become a great business. Unfortunately, Larry Page's hands don't look up to the task. The one positive I see is TV. I don't know about global share, but in the States, MMI has a huge portion of the cable set top boxes. This could be a great trojan horse for GoogleTV and Google's advertising goals on televisions.

        On a separate note, I can't believe David Drummond's garbage note from August 3. There's no way he didn't know about this acquisition. Google is paying almost the exact same amount, per patent, as the winning Nortel bid. I'm struggling to understand the message Google is putting out to investors, their licensees, and the consuming public. First they bid a huge number for Nortel. Then MicroApple beats their bid and they cry foul. Next they flirt with IDCC. Then they put out a note bashing the whole concept of intellectual property rights. Then, they spend $12.5B and justify it as strictly defensive. At best, Google is guilty of doublethink, and at worst they are horribly disingenuous. Either way, this situation would make the most loyal partner run to the next best option. How can Samsung, HTC, etc. possibly believe a word coming from Mountain View to be sincere? Finally, a good day for WP7 sales executives.

      • FalKirk

        "The one positive I see is TV. I don't know about global share, but in the States, MMI has a huge portion of the cable set top boxes."

        Set top boxes are already feeling the negative effects Apple's wave of disruption. I doubt that being in the set top box market is going to be viewed as a positive for very much longer.

      • Hamranhansenhansen

        Isn't that the other Motorola? Google bought "Motorola Mobility" the mobile handset maker. I don't think they got any TV stuff.

      • Joe_Winfield_IL

        No, the set top boxes are part of MMI. The other company, Motorola Solutions, makes things like barcode scanners and police radios. Roughly speaking, MMI is anything for home users and Solutions is anything for businesses.

      • Joe_Winfield_IL

        Imagine what Apple could do with ATV baked directly into the set top box on users' first TV input. They would create a massive disincentive to buy competitors' phones & tablets by offering seamless integration of media between computers, TVs, and mobile devices. It would have all of the benefits of the current ATV product, but it would be on every TV in the home and would instantly hit millions of customers. This distribution would also grab the attention of content producers in a big way. Of course, they would need to walk a fine line with the cable companies so as to not threaten their business model. But ultimately, Apple would be able to make it good enough for the Comcasts of the world because the iMoat would be significantly deeper and wider overnight.

        Google has different goals. They want to distribute lots of software so they can sell ads. No other form of advertising carries the juicy revenue of Television commercials, and Google desperately wants in. They don't have the same hardware-centric vision as Apple, so their position with the cable providers would be even more delicate. However, they would have the same moat-building opportunity. I bet an advertising revenue share would get everyone's attention without forcing Google to compromise its objectives. Imagine a cloud based, Google backed, DVR feature. Cable subscribers could access virtually unlimited content across a bevvy of (Android) devices on the road, and could still use their familiar TV remote at home when they just want to be a couch potato. Such a feature would be reliant on the bandwidth and content subscription provided by the operators, assuaging any fears they may have. It would also make the boxes themselves cheaper to make, maintain, and distribute. Finally, it would throw millions of users into the loving arms of Google's cloud. I feel like there is too much opportunity for even Page to screw this one up.

      • http://twitter.com/WaltFrench @WaltFrench

        All these positive opportunities come at the expense of the cable companies, companies that Jobs has famously called “orifices.”

        Somehow, if I'm GlobalCastRunner, I think I'd be pretty loath to buy my set-tops from a firm whose goal is to capture my entire income stream. And given that I *AM* MMI's customer, just as VerATTSprint IS the OEMs' customer, I think I have a pretty good chance of calling the shots on what features are available on boxes I buy and "give away" on my network.

      • Joe_Winfield_IL

        I'm just playing hypothetical, but what if the GlobalCastRunner DVR service worked a lot like iCloud? Only instead of downloading content for later use, shows and movies would always be streamed. Access would be restricted to cable subscribers, but the users' benefit would extend beyond anything the cable companies could provide on their own. For the providers, this type of service would lock in users to both content and bandwidth, while creating a savings on the in-home units. At the same time, users would be getting something for nothing. People would love MotoGoogCloud, as it would be a huge step up from the current GlobalCastRunner offerings.

        If Google thinks of their customers first, and their customers' customers second, they could have a pretty great product. Once entrenched, they could make a long play on the advertising side. Along the way, they would put millions of new eyeballs on Google's other cloud based services (docs, email, apps, YouTube, etc.) I have no confidence that Google will pull any of this off, as it requires putting the customer first. But still, it's fun to dream.

    • claimchowder

      It's not sufficient to own the hardware and software. That is just a prerequisite for making great products. Nokia had the hardware and software in house, and so had RIM. Both had pretty good (though not fantastic) products at times. Both are failing now. I don't see how Google would profit from having a hardware company at its disposal unless it was focusing on creating surprisingly great products.

      Which, so far, it has not done.

    • davel

      Google is not a hardware company and the best Android phones seem to be HTC and Samsung. If Google wanted hardware they should have bought HTC although they wouldn't get any patents.

  • http://twitter.com/storg @storg

    This is good news for Microsoft. Now they can be the "independent" provider of software. I am not sure if this move will impact Apple, but Microsoft is given a great opportunity to be a preferred partner.

  • Jaxian

    So they overpay $12bn for Motorola, which is in the red quarter after quarter and the result is "Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business."

    Makes perfect sense.

    These are not the actions of a confident company.

    • CndnRschr

      Dear (other) Android Licensees/Mistresses,

      Just to let you know that we've recently tied the knot with Moto. We think the world of her (more specifically, her patent nuptial dowry) and, of course, we still love you too. Please be assured, we will treat you all equally and that Mrs Google-Droid will not receive any preferential treatment, aside the usual marital conjugal rights. We've enjoyed our occasional one Nexus stands with you but you will understand that these dalliances must stop. We may be "open" in our relationships, but we aren't polygamists.

      Hope you understand,

      Google

      P.S. Last weekend was wonderful HTC, you were Incredible!

    • Tom Ross

      I wonder if Larry Page will be pushed out of his own company by 2014 for mismanagement, 30 years after the same thing happened to Steve Jobs.

    • FalKirk

      "These are not the actions of a confident company."-Jaxian

      Agreed. But I would say rather that these are not the actions of a company with a cohesive strategy.

    • Hamranhansenhansen

      The result is Motorola will no longer be suing Google or other Android licensees, which is what they have been threatening to do over the last month.

      You can look at what they paid for Motorola as a patent settlement. They are paying now for the fact that as they developed Android, they quite consciously decided to copy whatever they like and pay for it later once the dust had settled. They expected that what they could make from their copied software would be much more than what they would have to pay in legal fees later. But now it is starting to look like that will not be the case. It's hard to see how Android could be profitable right now, just with this huge write-off alone.

  • CndnRschr

    As Horace pointed out, this is primarily a patent portfolio defensive move. It shows quite how much Google needed some sort of patent portfolio in wireless to overpay this much (63% over ticket plus Motorola Mobile is not exactly a leader in the field). Google will have sent reassuring envoys to their other licensees telling them that this was a necessary move to protect *them* against the evils of Microsoft and Apple. All fine and dandy except that this is bull. Motorola could have provided Google with access or co-ownership of the relevant patents they hold to afford the same result. The bottom line is that Motorola saw a golden opportunity to dump its mobile division (at a significant premium). Some partnership. Some friend. The $4.5 billion paid by the RockStar group for the Nortel patents was a steal. Google is left with a mediocre hardware/software company, pissed off licensees (who are also exchanging body fluids with Microsoft) and $12.5 billion of their war chest vaporized. Great move. An-Droid indeed.

  • Childermass

    Great use of 'naive'.

    So many exciting threads to follow here: Google's hypocrisy over patents, supplier choosing to compete with supplied, obliviousness to ownership unless it is your own, and so on. The one that stands out to me is how little respect Google must have for Android to expose it so with this extremely high-risk strategy.

    • FalKirk

      "So many exciting threads to follow here"-Childermas

      So true! For every predictable result, there are going to be dozens of unpredictable ramifications stemming from this purchase.

  • Kevin

    It’s the reverse of Symbian….

    It looks to me as if Google have realised they need patents to trade with Apple etc.

    Nott sure where that leaves Motorola?

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  • Matthew Ward

    This does put an end to Motorola suing other Android licensees. It makes me wonder if Motorola’s recent litigousness was a negotiating tactic. The other licensees will at least momentarily look kindly on Google’s action.

    But I bet Bada gets some more engineering resources … And some companies take a second look at building on Meego. Everyone knows how this movie ends … Can Google actually extract a new script from Moto? Will Google really get better hardware out of Motorola’s engineering and operations groups?

    The whole thing seems a bit tone deaf …

  • Ted_T

    I'm guessing that while the patents/smartphones matter, this is all about the iPad market, where Android has been an abysmal flop. Google may be getting signs that the big players are not planning to waste too much more resources in attempting to build future Android tablets — thus they desperately needed a hardware company to produce a compatative Google-Pad.

    If so, it is possible that some of those companies will abandon the iPad market altogether, some will switch to WebOS (which HP stands ready to license) and some will wait for Windows 8 to materialize.

    For the phone market, the likes of HTC and Samsung are far too dependant on Android for this to turn into a Zune/Plays for Sure situation. But on the other hand no one other than the company making the actual iPad is making any money in the iPad market — so if my theory is correct, and Google starts producing a G-Pad via Motorola, look for a rush to the exists there.

    The most interesting player to watch will be Amazon — how will this impact their "Android" Kindle tablet plans?

    • EWPellegrino

      A motorola Nexus-Pad would be potentially interesting, but Google just promised in their conference call that Nexus deals would continue to be open to other OEMs on an equal basis – so it may not be possible without sending a very bad signal.

    • davel

      They could have just funded the tablet project with a vendor rather than buying it.

    • Tom Ross

      You know what's the problem for HTC? If there is an official MotoGoogle phone line out there, consumer will prefer that. HTC and Samsung will lose sales to Motorola.

    • FalKirk

      I'm sorry but I don't think that this analysis makes much sense. If Google wanted to strengthen their tablet presence they should have been focusing their efforts on improving the Android software for tablets. No need to purchase Motorola. And if they are going to actually partner will Motorola to make a tablet, then they are cutting the legs out from under their other partners which will lead to LESS Android tablets.

      • Ted_T

        My argument, based on pure guesswork, was that Google has inside knowledge that its main partners in the Android tablet market are already headed for the exits, due to abysmally poor sales so far. So improving Honeycomb or future tablet versions of Android won't be enough.

        True, they could simply pay someone to make a G-Tab instead of buying a $12.5B, 19,000 employee company — but the alternative, that they bought it *just* for patents seems a little far fetched. Unless they were far more panicked about the patent situation than I can imagine. But this doesn't help them at all with their most immediate threat, the Oracle/Java suit.

        If it is a pure patent play, what in god's green earth are they going to do with a money losing phone company and its 19K employees?

      • http://twitter.com/WaltFrench @WaltFrench

        You don't have to be Carl Icahn to appreciate that selling the patent portfolio to Google is a guarantee of imminent bankruptcy, probably by negative judgements in the courts. No way that MMI does that.

        And that's why Google did this deal, IMHO. The death of flagship Android firm MMI due to negative lawsuits re patents, would cause every other Android firm to bolt; they may have deeper pockets but have other options that can actually MAKE money, rather than extend losses.

        Google did this for patents. Not as actual defense, mind you, because the protection actually looks kinda thin, but because when the various Android parties DO settle with Oracle, Microsoft, Apple and others, Google will be able to claim they got better terms than they would've otherwise, preserving the appearance of being in control of the Android destiny, while kicking the can enough down the road (future royalties to MSFT making Androids less price-attractive) buys them time to do something else clever to regain momentum.

  • http://twitter.com/aegisdesign @aegisdesign

    Symbian is still licensed to more than just Nokia even today but the general gist, that mixing licensor and licensee, isn't always good.

    On the other hand, Apple pretty much rule Webkit development but you can't say that's been a bad thing overall and the other licensees have done pretty well out of it.

    • EWPellegrino

      The difference there is that Webkit isn't a consumer brand, it's just an open source framework. If Apple started to play rough with Webkit it wouldn't impact Chrome, because Chrome users mostly don't even realize that they're using it. Chrome would just fork off and take their users with them.

      Samsung and HTC know that they don't have that choice because their consumer branding is tied up with Android.

  • Nangka

    Who would've thought the company that'll thwart the Android tide is none other than Google itself!! Talk about shooting oneself in the foot, trying to save the other! I can see Google's act to be defensive against MS & Apple but what about Oracle, who is not in the mobility industry at all?

    All Android licensees should be scrambling for a exit strategy if they know what's good for them. Wonder what those pundits who thought Android is the new Windows now thinks.

    I can't wait for the "This all happened before" on Roughly Drafted.

    • http://twitter.com/aegisdesign @aegisdesign

      I bet Dilger misses the elephant in the room as usual.

  • Eric D.

    I wonder if all this aggressive action by Google isn't starting to hurt the core brand. Pitting themselves openly against Apple, Microsoft, Oracle and Facebook (to name just some of the bigger players) is going to tarnish their halo of trustworthiness. If people start losing confidence in gmail, I think that's going to hurt them a lot more than the theoretical dividends Android may deliver down the road. They're going from "Don't be evil" to "Don't f____ with us!" Not a smart play. Just ask Microsoft.

    • http://twitter.com/aegisdesign @aegisdesign

      "If people start losing confidence in gmail"

      Now that's funny. 😉

    • claimchowder

      Google's mantra, as MacDailyNews are so aptly putting it: "Do know evil" :)

      • Eric D.

        Heh. Hadn't heard that one.

        Now that I think of it, the best example would be MySpace. Remember them?

  • Niilolainen

    There should be a nice one liner on turkies and eagles to be had at this point

    • r.d

      The Eagle marrying a Turkey and having Chickens?

  • sve

    I think it's a recognition that however much Google would like to be a software-only company, modern devices need tighter hardware-software integration to be successful. There are simply too many things that get dropped during handoff when software and hardware are developed in separate companies: viruses, memory leaks, app crashes, handset version hardware incompatibilities, uneven OS upgrades, etc. It was holding back their delivered product quality. Apple was right. I wonder when Microsoft figures it out and acts.

    • FalKirk

      "I think it's a recognition that…modern devices need tighter hardware-software integration to be successful."-sve

      I would argue that this was just as true in the 1980's and 90's as it is today. Licensing and integration are not good or evil, true or false. They are strategies. Everyone thinks that Microsoft won the PC wars because they licensed their software. But there were actually a number of reasons why Microsoft won the PC wars and one of those reasons was because Apple faltered, stumbled and fell, all for reasons having nothing to do with their integrated model.

      The irony is that today's zealots of "open" declare it to be the inevitable winner in all things that touches while all the while the evidence contradicting that dogmatic point of view continues to mount ever and ever higher.

  • http://twitter.com/nmuppala @nmuppala

    Horace recently opined that Motorola and SE will end up being acquired. One down. One more to go.

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  • Matthew Ward

    The most interesting thing about this may be what a "not a Silicon Valley startup" move this is for Google. HP has done this sort of thing. Oracle is in many ways the sum of this sort of behavior. But for someone like Google (with the support of Android lead and x-Danger Andy Rubin I assume) is an invitation for a striking clash of cultures. Moto is old CE. Danger had a little office by the Caltrain tracks and had their manufacturing done by the Japanese. Google … this is totally new ground for Google. We can assume they are happy with the patent portfolio and see the hardware company as a bonus. And maybe they do focus Motorola on a tablet and set top boxes because Amazon rather than Apple is probably their greatest fear. Because Amazon's forked Kindle'd version of Android is probably not going to suck.

    This is a big bet with higher than average liability … AOL/Time Warner comes to mind.
    The statements by the Android licensee CEO's read like they were read (mostly) without editing by the licensees.
    And again. To have been whining so recently about patents and for the CLO to have known about this at some level. Tone deaf.

  • zato

    I think Google has wanted to do this for a long time. The patent aspect is partially a decoy. Google wants to be a hardware manufacturer like Apple. Apple is their #1 target. Defeating Apple is job-1 at Google, because that's what the geeks want. Google believes this will make them the new Microsoft.

    • asymco

      Then why not buy HTC which is better and cheaper (if you consider having to deal with 19000 additional employees).

      • Joe

        Htc has to protect it's Chinese business and google is not on good term with the Chinese

      • http://twitter.com/davidchu @davidchu

        60% of HTC's revenues come from North America and Europe. Their primary market is not Asia but Western countries. Moreover, their leadership is made up of mainly Chinese-Americans. It's also based in Taiwan, so China isn't a factor.

      • El Aura

        Because HTC is not for sale. I could not find any precise information but it seems like almost all East-Asian big companies it is still mainly family-owned or at least family-controlled (well, in mainland China the state is often involved as well and in Japan, banks and cross-holdings).
        There are very, very few big (east) Asian companies ever sold to Western companies, Daewoo being one of them, otherwise it almost always is either only a minority stake or a joint venture.

      • zato

        Only Chinese management can run HTC.

    • Hamranhansenhansen

      No, defeating Microsoft is much more important to Google than defeating Apple. Google makes a lot of money off Apple and their users. Google is the default search on every Apple device. Apple makes the core of Google's Chrome and Android Web browsers. Google is the maps on Apple devices. Apple is deeply committed to the open Web, they are a major part of HTML5, they don't get in Google's way at all, whereas Microsoft is only just now reforming themselves from a decade-long attempt to close the Web. Apple customers have systems that don't crash and don't fall off the Internet and don't get viruses … they are "Google Ready" so to speak, while Microsoft's customers need to install things like Chrome Frame just to even use some of Google's software. About 80% of the computers at Google are Macs, because both Apple and Google are part of a larger Unix culture. Microsoft is a whole other thing. They are not even in Silicon Valley! Apple sees Google Search as a Web application that a lot of their customers use, but Microsoft sees Google Search as an add-on for Windows, something that should now become a core operating system feature, made by Microsoft.

      • zato

        Very good reply. Microsoft is certainly in Google's sites. I think Google is a long way from being able to compete with Microsoft's corporate business. Google wants to "own" the "internet OS". That is job-1. Microsoft is more long-term. Microsoft "owns" the IT people in big business. They will continue to buy Microsoft.

  • claimchowder

    So, will Google
    a) use the patents to protect just itself against litigation, or will it
    b) extend this protection to Android licensees?

    In case a) they will have paid a lot to protect their corporate behinds, nothing else. No advantage for the Android project at all.

    In case b) the Android projects gets the IP for free or cheaply, but that will reduce Motorolas chances in the market (their patents are essentially being sold below value). So Google's investment loses value.

    Either way it doesn't seem to make a lot of sense.

    • FalKirk

      Excellent analysis, Claimchowder. I suspect that it will be the latter: That Google will extend the protection of their newly acquired patent portfolio around their partners. And if that is the case, then Google just spent 12 billion dollars and committed themselves to maintaining an entirely foreign company and culture, all to boost what was originally meant to be a defensive play, a mere sideshow.

      The strategic intent of Android was for Google to cause a major disruption to their opponents at only a minimal cost to themselves. They now find themselves spending more and more time, resources and money on the supposed sideshow with little or no benefit to show for it. They have now willingly jumped into the trap that they themselves placed in their opponent's back yard.

  • http://twitter.com/WaltFrench @WaltFrench

    “ seems naive at best.”

    Perhaps they meant, “we want everybody to swallow these empty promises as if they had no experience dealing with us, with licensing or with competitive businesses in general.”

    I've had the pleasure of being on the surviving side of one or two deals somewhat like this. These promises need to go unbroken at least thru regulatory approvals.

    But this deal does virtually nothing for the MMI/MSFT issues, and MMI is doing poorly in the Android race as it is, so Google is implicitly saying it is going to transfer its wealth (MMI patents) to other OHA members who are beating MMI in the market?

    I'll admit having been very surprised by this deal. But assuming anti-trust types don't squelch it, and the breakup fee isn't exposed as a simple gift to MMI to keep up Android's appearance of robustness, I simply can't fathom how this will work out well for the ecosystem.

  • MattF

    As noted upthread, Google could have acted in a more focussed way that would have achieved, at lower cost, any of the various possible goals that have been cited. I'll bet that in a year's time people will be wondering what it was all about. For what it's worth, I'm wondering that now.

    • David Chu

      I’m guessing there isn’t an algorithm for focus.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        Yes there is, it's basically saying "no" to distractions. There must be a sub formula for determining what are the distractions. Otherwise, what Apple does in terms of focus must literally be Magic.

      • Hamranhansenhansen

        I think the formula is just to have very high standards. If you only do things at a really high level, then you have to do fewer things. You recognize that small and unimportant projects can kill big and important ones by stealing their oxygen. If you have high standards, you don't let that happen to your big and important projects.

        I think part of the reason Apple is so successful is that their focused philosophy is very 21st century compatible. In a world with an Internet, new and original stuff that actually fulfills its promises is really highly valued. A small range of really unique products is better than 10,000 SKU's of clones. I think pretty much everyone can learn a lesson from that to apply to their own business.

      • http://twitter.com/davidchu @davidchu

        I posted the original comment as a joke, but here's my take…

        Focus is the sum of a lot of things. It's knowing the limits of your abilities, what will be important in the future, breaking down a vision into small tasks, and a host of other things. On top of all of that, it's having the grit and determination to work through the obstacles.

        Too many of these things are qualitative and so it should be. Otherwise, we could replace CEOs with a handbook or a computer program.

  • newtonrj

    Google is leveraging search to fund a free O/S in phone and is pissed when Microsoft and possibly Apple get license fees from Google's own O/S. BTW, they talk phone but Google is really upset they can’t touch the pad/tab device market. Just wait until Apple steals something Google was first at – TV.

    There is no doubt that 25k patents from Moto will be helpful. The problem with patents, is they are both a weapon and shield –both tools of war. I hope they have a boat-load of lawyers because they are going to be busy with this new investment.

    Finally, it makes them pay for something they have been getting for free, Intellectual Property. They have been stepping on many patents along the way to greatness, with no previous regard for the lawsuits coming. This is a $12.5B catchup play that is quite elegant. -RJ

    • Nangka

      What I don't understand is Moto is already suing Apple with Apple counter-suing. What good is Google getting in on the act other than deeper pockets?

      If Moto is confident of its suit against Apple, it doesn't need Google. Otherwise, Google is still no white knight.

      Like someone said on other sites, Google could've saved $7B getting Nortel's patents for $5B.

      Stupid deal.. Google is getting less & less trust worthy among the ODMs by the day.

      • newtonrj

        I don't know. But you might find your answer in http://fosspatents.blogspot.com/ There Florain Mueller argues that Moto 'vs' Apple lawsuits continue until the merger is complete. If Apple wins post-merger against Google 'nee Moto, it would not bode well for Android licensees.

        Florian rightly (IMHO) asserts that whaever you think, Google values Android's future to the tune of at least $12.5B! -RJ

      • Tom Ross

        Well, that's a nice sum for Oracle to go by in their damage claims against Google.

      • FalKirk

        "What I don't understand is Moto is already suing Apple with Apple counter-suing. What good is Google getting in on the act…"-Nangka

        Agreed. Although this slightly simplistic, Google just paid 12.5 billion (plus the headache of integrating Motorola into their company) for something that they were already getting for free.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        I'm sure Google is going to drop the suit immediately, since it won't use patents offensively. /gullible

      • EWPellegrino

        I think we have to consider that the Moto lawsuits are now very different beasts, let me try to make a case for why.

        Motorola was almost completely dependant on the US smartphone market for their survival, in any scenario where Apple won an injunction against them preventing access to that market Moto would have to capitulate. Even if they had similar leverage over Apple they would still have to accept terms favourable to Apple because Apple could both survive with a temporary injunction and because Apple would have far more resources for engineering round such an injunction.

        Essentially pre-merger Apple beat Moto whether it won or just drew even on suits, now the situation is symmetric – a draw will force Apple and Google to come to at least roughly equitable terms. A similar case can be made for Google versus MS, though that is weaker since MS has so little income from WP7, the fight is still asymmetric there.

        Oh and since Moto has a 3BN cash balance it is really only costing 9.5BN.

  • http://bernardmoon.blogspot.com bernardmoon

    Always the Google hater. Your post was at least consistent with your worldview.

    • George Slusher

      Any evidence for that assertion, bernardmoon? Cite several clear, unambiguous examples.

      Also, I wonder why you bother reading Horace's writing if you have such a low opinion of him?

      • George Slusher

        Perhaps you don't understand the "rules" of debate. The person who makes the assertion has to provide the evidence. This is a common tactic by those who do NOT have any evidence.

        Name-calling isn't helpful to your case, either. You didn't make a cogent argument disagreeing with any of Horace's information or conclusions. Instead, you attacked him, personally. You might benefit from looking up "ad hominem" and the genetic fallacy.

    • asymco

      I love Google and use many of their products every day. I am not a fan of Android as I think it distracts the company from being even better.

      • http://bernardmoon.blogspot.com bernardmoon

        Lame for deleting my reply. Thanks for the correction, which I will correct that you're not a fan of Android vs. Google.

      • FalKirk

        Was his deletion of your reply lame or was it simply that your reply was lame?

        Take a look around you, bernardmoon. This is a place where some of the brightest and best come to share their thoughts and insights. If you have something intelligent to say, I guarantee you that your comments will be received with respect and responded to with thoughtfulness and courtesy. But if you are just here to call others names, then you will receive the scorn that you so rightfully deserve.

      • FalKirk

        I have often wondered whether Google's initial decision to wield Android against both their enemies (Microsoft) and their friends (Apple) was an error in Grand Strategy. If one views today's acquisition as the direct consequence of that initial decision, then there is no further doubt in my mind.

      • http://bernardmoon.blogspot.com bernardmoon

        Such a brilliant analysis that shall make me a regular here now. Self-proclaiming "best and the brightest" is a very enlightening in itself.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        What does the ! -80p next to your name mean?

      • handleym

        You can click on it to see.
        It's basically a "reputation meter". High numbers (up to around +100) mean you have a good reputation. Negative 87 means, well…

      • gslusher

        handleym said it, but one also needs to note that the "reputation" score may depend upon through which system one logs in–intensedebate, WordPres, twitter, or OpenID, though intensedebate seems to be part of or associated with WordPress.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        Thanks, guys. I thought it meant he owed Horace 80 p. 😀

  • davel

    This seems to be the first significant action by the new CEO. I wonder if Schmidt would have done this.

    As many have posted above I believe this hurts Android tremendously and may in fact kill it. A year from now Android may be MMI, some half hearted products by Samsung and HTC and a bunch of cheap phones.

    Will some or all of the patents be part of an Android license? Will you have to pay separately for that? Will MMI get first crack at the features? Will Google continue to keep its code from its partners? etc.

    It feels as if Android is in transition and this is the next step. If I were Samsung I would be on the phone with Microsoft and hiring more developers to accelerate work on my own OS.

    • Tom Ross

      "A year from now Android may be MMI, some half hearted products by Samsung and HTC and a bunch of cheap phones."

      And that may still be enough to hold 50 % market share if HP and Microsoft don't step up their game. Google would love an Android monopoly with Moto as the premium brand and the rest commotized.

      • FalKirk

        "Google would love an Android monopoly with Moto as the premium brand and the rest commotized."-Tom Ross

        Could not disagree more. By distributing Android for free, Google had its "partners" doing all the heavy lifting in its war against the rest of the mobile phone industry. If Google was foolish enough to renege on its promise and integrate Motorola more closely into the Android fold, it would not gain a premium brand, it would only lose its many existing allies.

        As Horace has mentioned, above, being a maker of only 4% of the hard ware is far less advantageous than being the maker of nearly 50% of the software. Making money from hardware is hard. And there is absolutely no evidence that Google is good at it and there is some evidence that Google is not good at it at all

      • Tom Ross

        FalKirk, my presupposition here was that Windows Phone and webOS will keep being rejected by the market, Android will establish a majority market share and therefore branded Android players (Samsung, LG, SonyEricsson) as well as all the Chinese off-brands will have nowhere else to go to license a os that actually sells phones. In that scenario they would have to keep making Android phones, no?

        Now, if Google started giving Motorola preferential treatment it would spoil the premium market for the branded players. They would either have to join the commoditized business of the off-brands or close shop. Google would of course like that because the value would move from the hardware to their services and to some extent their premium hardware. Remember, Google wants to drive the cost of everything else down to zero.

      • handleym

        "FalKirk, my presupposition here was that Windows Phone and webOS will keep being rejected by the market,"

        Is this a reasonable supposition, rather than path dependence? I don't want to come across as too much of a snob, but it seems like the market that cares about the quality of their phone buys Apple, a tiny contingent of hackers buys Android, and the masses buy whatever is being pushed by the phone vendors and the telcos. That's Android because it got their first (with, perhaps, a little reluctance to get involved with MS because everyone has been screwed over by them in the past.)

        The point is, if this IS the case, then it's a situation that can be changed easily enough by ten men at the top deciding to switch their focus and to all start pushing MS. (WebOS seems too much of a dark horse right now, though HP could perform a Hail Mary pass, like make the whole thing open source — more open than Android — and try to light a fire under it that way.)

      • EWPellegrino

        You're missing some pieces of the picture though. For starters MS has a terrible reputation in the smartphone space and not just with OEMs, WP7 may have decent customer satisfaction but earlier versions of WinMo did not and there is a great deal of resistance to overcome with consumers and the channel.

        WP7 also has practically no ecosystem, and consumers have rapidly bought into the idea that 'There is an app for that', if they get sold a phone where there isn't they will return it.

      • davel

        Which market do you mean? The telcos ( VZ ) used Android to fight Apple. They were successful at this. Would they want a big strong aggressive Google? Perhaps they will shift and push Windows and or Palm to combat Apple and Google. I think it is good for the telcos to have the platforms fight each other. This way the telcos can guide the phone customer in their choice of a phone. They don't want the customer to say I want an Apple and if you don't give me a good deal I will walk across the street.

  • http://www.loudscreen.com vinner57

    Clearly a deal to buy a truck load of patents with which to defend themselves… which makes sense. but…
    Is Motorola now suddenly going to learn how to make insanely great products?
    Is Google suddenly going to learn how to be a competitive hardware manufacturer?
    It seems unlikely.

    The end game is surely the 2-3 year decline and disappearance of Motorola Mobile as an entity and Google left with very expensive protection that it surely could have negotiated some other way.

    • http://twitter.com/WaltFrench @WaltFrench

      A truck load? No, think “tonnage.” It worked so well for RIM.

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  • OpenMind

    One overlooking impact is that MMI/Google relation to network operators. Google is competing with network operators in some degrees. Adding MMI to its portfolio, how comfort are network operators to have Google as supplier and competitor at the same time?

  • Sandeep

    First thing that comes to mind is Ave Maria!

    I think this succinctly illustrates the power of the incumbents. Google has been trying to get into the Operating System game, which gives the control to 'print money'. To stay relevant it has had to fork out $12.7B for a company that is in the red.

    Shows the true cost of Android to Google is probably in the $20B range (MOT/Android acquisition, development, lawsuit cost).Truly shows that the game has moved from phones to higher level of services.

    • FalKirk

      "Truly shows that the game has moved from phones to higher level of services."-Sandeep

      What it shows is that Google has forgotten what game it is in. Google just risked the "Castle" in order to defend the "moat".

  • h4z3

    Very Clever move, wait untill the platform is mature enough (after lots of other companies money have been invested in the platform), then join as the black horse, now let's see if Google have what it takes to live it up to the hype, somehow I doubt it, they are good at geeky stuff, not so much at anything else.

  • pk de cville

    This may be troublesome for Google, I hope Apple doesn't make a higher bid.

    • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

      I've been wondering that myself. Is there any technical reason Apple, MS, or a consortium couldn't bid on Moto Mobile, either to acquire the portfolio or to drive up the price?

      • Tom Ross

        Especially because Apple could use some factories if they want to become a billion device company. Don't know if Motorola's factories are in good shape though.

    • tronin

      According to one ex-Apple employee that posts elsewhere from time to time, Apple doesn't value Moto's IP very highly.

  • Steve Setzer

    I think any competitive "juice" Motorola gets from being inside Google will be more than offset by the negative effects of being acquired. Corporate cultures will clash and the employees and culture of the acquired entity nearly always lose. Google just did HTC and Samsung a huge favor by demoralizing Motorola's people for the next year or more.

    When an established company is acquired, the message employees hear is "you failed, you weren't good enough to thrive on your own, so we sold you while we could." True or not–doesn't matter.

    • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

      Motorola was quickly "de-establishing" itself. It's hard to see what material difference on employee morale this acquisition is going to make for a company that was already headed for the dirt at a steep angle. If anything, it would boost morale for any employees with equity in the company. While this move might lead to eventual staff cuts, it also puts them off into the future, whereas without the acquisition, staff cuts seemed inevitable and much closer at hand.

      Also, if we are to take Google's statements at face value (I know, I know), Mot is going to operate independently, not inside Google. If this is true, we won't see many cuts due to redundancies. We might even see a substantial amount of new hires.

      Lastly, this merger might actually be a good fit, as both companies have an "engineering corporate culture".

    • http://twitter.com/jinkhet @jinkhet

      I think they could leave Motorola as a wholly owned subsidiary and not have quite as much to worry about in terms of culture. I agree, however – "you failed" is very likely the message employees will receive… although we don't know what sorts of retention bonuses they'll try to give to their new employees.

  • Tom Ross

    I do have to say that this will save Apple and Microsoft a lot of money for buying up useless patents from under Google's noses. I would have hated to see the Nortel auction repeated over and over again with increasingly ridiculous amounts. Good news for the industry in that respect. The patent wars have reached their apex.

    • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

      I read somewhere that, on a per patent basis, Google will be paying about the same for the Moto Mobil patents as the Apple/MS consortium paid for the Nortel patents. If the prices are indeed ridiculous, this doesn't seem to signal a turning point, but a continuation.

    • handleym

      Wrong wrong wrong. What has actually happened here is a fossilization of the tech world.
      Once every MAJOR company has a huge patent portfolio, we sink into stasis. The companies learn to live with each other, and they all act together to squelch outside competition.
      When Google was outside the charmed circle, there was a hope for patent reform. Now that hope is dead — the big guys will, if anything, push to maintain the status quo.

      Long term, this is very BAD news for innovation in the tech sector. (And, if we want to be grandiose, probably for America, seeing as this WAS the most dynamic sector of its economy.)

      • claimchowder

        "Long term, this is very BAD news for innovation in the tech sector."

        Maybe, but I'm positive at least Apple will keep innovating no matter what. It's in their genes (yes, probably in their jeans, too 😉

        BTW: Patent reform is desirable indeed. With the WIPO and the local IPOs being profit-oriented organizations (NOT non-profit government agencies) it's no wonder they grant bogus patents en masse. Make them responsible; charge them a large fee every time a patent has failed to stand up in court, and things might improve.

  • florin

    This is a general premise and mostly correct. There are differences here that need to be considered and affect the conclusion.

    Mobile OS has evolved and developing your own has become borderline impossible. The point made by the article took place in the background of Apple OS / Android emergence. Such conditions are rather hard to replicate for the forseeable future. It might be that the nature of the mobile OS development was even more consequential than an uncomfortable alliance. Nokia eventually dumped Symbian as well. Unconfortable or not, hardware providers need a (smart) OS. At best, what you are going to see is more polarization.

    In view of patent threats, Google’s move is understandable. If the execution brings inovation and is not mired, the move is genial.

  • http://twitter.com/kleptco @kleptco

    Google didn't wake up and decide that they wanted to be vertically integrated just like Apple given that Android is torching iPhone. Google clearly wanted to neutralize Apple's desperate attempt to compete via patent lawsuit – done. Google will divest the Motorola hardware biz to Android partners. This is about enhancing the multi-device maker approach, not blowing it up.

    The interesting thing will be to see how committed Apple is to the legal fight. Let's see Apple offer a bigger premium for Motorola.

    • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

      Well, I'm sure Google/Moto Mobile is going to drop that suite against Apple the moment the acquisition goes through. Google doesn't use patents offensively, after all.

      I'm curious as to how Google will divest the hardware biz amongst its partners. At best, I envision Capt. Hook handing out shares of loot to his pirate band, but how does this work in the real world? "You, Samsung, take the TV business. HTC, you get the phone designers and sourcing channels. Sorry, LG and SE, all that's left are the modem scraps. Ye'll have to fight over them. Arrrrr!"

      At any rate, if this gets Google to stop whining about its competitors being anti-competitive because they dare to compete, then I think the deal will be beneficial for all.

    • George Slusher

      "…given that Android is torching iPhone."

      How do you figure that? Have iPhone sales dropped recently? In reality, year-over-year, the sales of iPhones were up 142% in the last quarter. The overall smartphone market, according to Horace (see "The Android and iOS pincer movement" from Aug 4), grew 73%, so Apple is growing twice as fast, though not as fast as Android overall. (Some Android manufacturers, like Motorola, have not been growing very much, but Samsung & HTC have had exceptional growth.)

      Apple is now the fourth-largest manufacturer of phones in the world–counting ALL phones, after Nokia, Samsung, and LG. (One should note that LG has been losing money on cellphones.) Samsung has grown the fastest, but some of its phones use its own OS, Bada, rather than Android. In terms of smartphones, only, Apple may be the largest or second-largest, again according to Horace's articles. (Samsung has about the same share of units sold.)

      Taking the entire cellphone industry, in May, Horace estimated that Apple had 5% of volume (units sold), 20% of the revenue, but 55% of the profit for the first quarter. I believe that the estimate for the second quarter is even higher, but I can't find an article here right now.

      Now, just how is "Android" (which isn't a "thing") "torching iPhone"? The companies being "torched" are Nokia and, to a lesser degree, RIM. (MMI wasn't doing all that well, either.)

    • Hamranhansenhansen

      Why would Apple want to stop Google from buying rope and hanging itself? This Motorola purchase means Android may never, ever be profitable.

      Your characterization of Apple as "desperate" is ridiculous. Not only are they on top of the world in every way, but the entire 21st century has been a vindication of Apple's 30 year old philosophy of consumer computing. The people want iPod computers, not PC computers. If XOOM had been successful, Motorola wouldn't have been reinventing itself as a patent troll and Google wouldn't have had to spend their last 2.5 years of profits to buy them and shut them down.

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  • allanram

    I'm just curious about the quality of Motorola's patent portfolio. Apparently, Apple and Microsoft saw more value in Nortel's patents that made them fall over themselves to buy them. I'm assuming that if they thought Moto's patent portfolio were more useful, wouldn't they had a go at Moto first before Nortel?

    • George Slusher

      Possibly for two reasons: First, the MMI patents came with a burden–MMI's hardware business, which neither would want. Carl Icahn suggested that MMI sell its patent portfolio, not the hardware business, which isn't worth very much. Second, there are legal issues involved, especially for Apple, since MMI is a competitor. Nortel's patents were unencumbered by any business. (Nortel filed for bankruptcy in early 2009. The patent sale was part of the liquidation so they can pay creditors.)

    • Hamranhansenhansen

      Nortel had 4G patents. Motorola's patents are old stuff. Nortel's patents were for sale, separate from Nortel, while Google had to buy all of Motorola. Google paid 4x what the Rockstar consortium paid for the Nortel patents. Apple is on the hook for 2.5 billion but Google is on the hook for 10x that amount.

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  • Willem74

    How come everyone says it might or will scare of other Android handset makers – but on the other hand don't mention at all that the Microsoft – Nokia relationship is, even though it's not a full takeover, basically the same..Like Nokia getting early acces to the software and as Elop once said: is basically allowed to do anything they want with it.

    • http://twitter.com/jinkhet @jinkhet

      I have to think that, on some level, its because nobody really cares about Windows Phone right now. Two companies struggling to enter a new market (modern smartphones) and joining forces may or may not be of consequence to anyone in mobile. Google and Motorola linking up is a huge deal though.

    • George Slusher

      See Horace's article, "The fate of mobile phone brands" for an idea. In terms of units sold, Horace estiamtes Android to have 41%, iOS 19%, Symbian 16%, RIM 12%, Bada (Samsung) 4%, and WInMo/Windows Phone about 1%.

    • Hamranhansenhansen

      Microsoft has almost no non-Nokia hardware support for Windows Phone 7. So what happened with Nokia is they landed a whale, and nobody really cares what the 2 tunas they had before think about that.

  • usmsci

    I think a lot of you have been looking down the wrong fork in the road. Do you really think that Google woke up last month with a bunch of patent lawsuits hanging and decided that it would purchase Motorola? This deal has been going on for a while now. Yes the patents they gain are important but Motorola has a bunch of hardware out there in the range of cable modems(mine is a motorola), cable top boxes and various other networking stuff. It is not much of a stretch to merge home networking devices to Google TV, especially since the sales of google tvs have been rising thanks to the price drop.

    Motorola currently has patents in things like MPEG-4 and all of a sudden you have a lot of offer as far as the web platform aspect of things as well as cell phone capabilties and now google has that.

    This is about providing patents to themselves and safety of the other manufacturers(HTC, samsung) from patent trolls. This also provides long term investments in the mobile market with their tablets, their Google TV offerings and merging their hardware into the general home as far as apps on appliances including the television.

    I wouldnt be surprised if Google came up with a strategy to be a cell phone provider, their own ISP or perhaps something else that I have neglected to mention. Obviously buying Motorola for $12B was far more worth it than Nortel patents.

    • allanram

      I would agree with you about the cable modem side of the deal but not on Moto's mobile phone division which hardly has any presence in the smartphone market share, being in the red for some time now. If all Google wanted was to protect Android from patent litigation, they could've just bought Moto's patent portfolio (which Motorola would have accepted realizing they badly need some quick cash infusion) .

    • Tom Ross

      Cable operators control the set top box market and they don't like Google TV (which was also rejected by the market by the way). If Google forces Google TV on Moto's set top boxes opreators will just start buying them from Huawei or Samsung.

      • usmsci

        just because companies like comcast doesn't like google tv doesnt meant that they own or should own that market. I have comcast and i bought my own dvr, my own cable modem and everything else. There is no reason that comcast should be able to tell me what cable set top box i should use to get cable. Their job should be to provide access to cable and access to the internet. Period. What hardware we use to get to the cable or how we get the data to get information from the internet shouldn't be up to cable companies(who also tend to be ISPs) and frankly isn't there business and in fact anti-competitive in nature when most people have only one option for cable or high speed internet, thanks to the governments blessing and ignorance about technology.

        Remember At&t trying to force people to buy at&t phones? Yeah. Illegal and partially the reason for the initial ma-bell break up.

        This isn't grandstanding. Google will come in with those arguments once they seek to totally overtake apples strategy in the tv market and use the internet to start the move into the realm of netflix.

        It is going to be a battle. The battle for eyeballs, for open and free standards for all of us and the greed of corporations(including google…not a google fanboy and dont want them controlling everything)

      • http://twitter.com/WaltFrench @WaltFrench

        “There is no reason that comcast should be able to tell me what cable set top box i should use to get cable.”

        Whenever I see “should X,” I understand “will not X.” I mean, the cable cos have successfully resisted the smart card technology challenge and continue to bundle their set-top boxes without giving independent manufacturers a chance to come in.

        Even worse for Moto, which today must derive 99% or more of its set-top box revenue from the very firms that outraged consumers are supposedly going to cut out of the action.

        If Motorola wants to continue that business, they'll have to ring-fence it from the clever boys in Mountain View.

      • usmsci

        Well cable companies would be smart to contact google now and work with them on creating software that is robust, useable and not full of bloat – because no matter what cable companies have tried to do they cannot write software. They should focus on delivering content people want and ask to watch and delivering that service at the lowest cost possible.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        And give up all that rich, chocolate-y monthly revenue from selling packages to cable TV customers like yourself? They've fought a la carte pricing tooth and nail. Why do you think your local cable monopoly will be in a hurry to sell you a GTV set top box?

        Also, I don't think any cable company "works on software". It's the vendors that sell them the set top boxes that do that.

      • George Slusher

        "There is no reason that comcast should be able to tell me what cable set top box i should use to get cable."

        Perhaps not, but, as Steve Jobs said at the D8 conference, the cable companies GIVE AWAY those boxes and DVRs or charge a very small fee for them.

        "in fact anti-competitive in nature when most people have only one option for cable or high speed internet, thanks to the governments blessing and ignorance about technology."

        Do you live in a large city, like New York, LA, San Francisco? The great majority of people in the US don't. The cost of putting in the infrastructure for cable tv and internet is huge in less-densely populated areas. I have friends living only a few miles away who do NOT have cable TV available, at all. They get TV & "high-speed" Internet via satellite. Some don't even have that option, as they live on the north side of what is called here a "hill" but would be a "mountain" in the eastern US. (E.g., 2000+ ft above the valley) One bought land on the south side of the "hill," and had a satellite system installed and run to their house, about a mile away. The cost was over $20,000.

        In many areas, the only way ANY cable company will invest in the infrastructure is if they are guaranteed a monopoly. (Their rates are subject to local and state governmental controls.)

      • usmsci

        They dont really give them away. Heck comcast just recently raised the rates on cable modems(by motorola) at a whopping $7 a month. I bought mine for $40. Once you pay for it does comcast take that $7 off your bill? Nope. They keep billing you. Its not exactly free. I do not live in a large city – i live in the south, population about 150,000. I have comcast. The local community decided to sign another contract instead of trying to filter in Verizon FIOS or *gasp* looking at alternatives for people to get city-wide wireless.

        The issue that i will take up with your post(or rather with comcast) is that they shouldnt have the only right of way(the last mile) and own all the infrastructure to begin with. The pure term of open would be for the city(every city) to own the infrastructure(build it through short term county and state taxes or in this case buy it back from comcast) and short term gov't subsidies if needed for more low income areas and LEASE out the infrastructure to whomever wants to come in and offer SERVICE. In this sense, comcast could lease the lines, verizon, at&t anyone else who wanted to compete. Then they would all have to compete on service and the channels that they could provide(or heaven forbid a la carte) along with great customer service. If you dont like one, you go to another.

        It would also go along way on getting people packages that they can live with instead of one company raising the rates, claiming business costs. What if i don't use XFinity? I use netflix. What if i dont use my comcast e-mail? I have gmail with better storage caps. What if i want ESPN but not disney? Why should I have to pay for ESPN during non-football season so that i can constantly watch poker re-runs? Why should I have to pay for more than i use?

        To kind of merge all my thoughts together then is where google could come into play or any upcoming startups. If you just want to stream tv fine. If you want more fine. Google *could* take moto and create a nice google tv setup or provide their own ISP mechanism if this takes off. I welcome competition but not control over all our lives at the same time.

    • davel

      This is a good point about Google TV. MMI assets in this area can be leveraged by Google. I wonder if now that Google owns a part of MPEG4 if they will make their patents in that area freely available?

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        MPEG4 is offered under a FRAND (Fair, Reasonable, and Non-Discriminatory) license. I'm not sure that Google opening the parts that Motorola owns would have any impact on MPEGLA to control MPEG4, if it would even be allowed. And unless VP8 infringes ONLY on Motorola's patents, VP8 isn't going anywhere.

    • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

      "This is about providing patents to themselves and safety of the other manufacturers(HTC, samsung) from patent trolls."

      How does that follow? Patent trolls have no products themselves, thus cannot possibly infringe on other patents, and therefore patents cannot be used defensively against them.

      I'm not sure how Google owning patents will help Samsung or HTC or others, unless Google offers them indemnification. That would be a big friggin' deal.

    • Hamranhansenhansen

      > Do you really think that Google woke up last month with a bunch of patent lawsuits
      > hanging and decided that it would purchase Motorola?

      Yes, that is what happened. There is reporting on this already. The deal happened only in the last couple of weeks.

      The Motorola CEO spent the last month telling all the Android partners that they were about to get sued bad by Motorola. Google was backed into a corner. They copied a lot of stuff for Android, so now they are at the mercy of the patent and copyright holders they stole from, who are not obligated to license the tech to Google at all. So Google does not effectively own Android anymore. Any patent holder they are infringing on can have Android pulled from the market until it stops infringing.

      > Yes the patents they gain are important but Motorola has a bunch of hardware
      > out there in the range of cable modems(mine is a motorola), cable top boxes

      Wrong Motorola. Google bought "Motorola Mobility" the unprofitable handset maker only.

      > Obviously buying Motorola for $12B was far more worth it than Nortel patents.

      No, that is not obvious. The price tag for Google is actually higher than that, and that is still 4x what the Nortel patents cost, and they were bought by a consortium. So Google is paying about 10x what Apple has paid lately for patents. And who knows how many of Motorola's patents are good? The Nortel stuff was future-focused, 4G patents. Motorola has not been a player for some years now. Pull-up antennas and keypads and accessory batteries are not exactly great patents when all anybody wants to make or buy is iPhones.

  • mexxton

    Re the strangely similar PR releases of the android licensees:

    I am interested if this is a case to be investigated by SEC? I thought Google/ any publicly traded company would be required by law to reveal such a deal in an "ad hoc" message to all their shareholders without involving or informing third parties beforehand?

    • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

      Actually, if they were to have taken your suggested action, that might trigger an investigation because of insider trading. The by-the-book reveal is just what they did: a public announcement where everyone learns at the same time (potentially and supposedly).

  • http://twitter.com/WaltFrench @WaltFrench

    just, "no." It's not practical. Both boards approved it, recall?

  • rasimo

    Apparently Google bought MMI to keep it out of Microsoft's hands- so Microsoft wouldn't be able to make even more money from Android. http://gigaom.com/2011/08/15/guess-who-else-wante…

  • David

    Did anyone read Florian Mueller's take? Google has to pay a $2.5B break-up fee. In essence, if the sale doesn't go through, Google pays a 20% penalty. Yikes!

    Talk about a poison pill. I want MMI's guys negotiating *my* next contract.

    • asymco

      That number says a lot.

  • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

    I'm sure Google's negotiators made sure there was language to protect Google, if Google had a valid reason to walk away, or was forced to if regulators don't approve of the deal.

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  • jameskatt

    Motorola's patent portfolio hasn't stopped Microsoft or Apple from suing Motorola.

    How would Motorola's patent portfolio stop patent trolls (non-practicing entities) from suing Motorola if non-patent trolls aren't afraid to sue Motorola?

    How would Motorola's patent portfolio stop Microsoft or Apple from suing other Android OEM's???? It does not.

    How would Motorola's patent portfolio stop Microsoft or Apple from suing Google when it hasn't stopped them from suing Motorola???? It does not.

    How would Motorola's patent portfolio stop patent trolls (non-practicing entities) from suing Google when it hasn't stopped Microsoft or Apple from suing Motorola???? It does not.

    So how does Motorola's patent portfolio exactly protect Android????

    All that Google's purchase of Motorola's patent portfolio seems to do is to protect other Android OEMs from Motorola's patent suits against them, potentially adding another layer of costs to Android.

    • Hamranhansenhansen

      > So how does Motorola's patent portfolio exactly protect Android????

      Motorola was going to sue all the Android partners. Google-owned Motorola is not going to do that. Period.

    • Magnus K

      You forgot Oracle. Google seems to be losing that one, and mobile patents mean nothing in that case.

  • Andrew

    Thanks once again to "The Horacle" for presenting an informed analysis of the industry when other commentators are jumping to conclusions and distorting the facts to fit their agendas.

    I happen to be in a good mood, so despite all the sordid stuff involving lawyers and bankers, here is what I think are the potential "Good Things" to come from this acquisition:

    1. A widely-available Android Reference Phone: the previous models were both universally recognised as superior to alternative Android phones and subject to supply limitations, thought to be related either to Google's inability to do hardware support or complaints from Android rivals;

    2. A better iPad alternative: no Android tablet has been able to compete with Apple's iPad. RIM and HP have the advantage of owning both the hardware and the OS, and they too are inferior. Now Google owns both, they stand a chance of offering a competitive product.

    3. A better Google: if the above 2 points pan out, and if Google survives all the litigation threats, it may be able to improve the functionality of Android phones, Android tablets and even other stuff like the Google TV. Then it may be able to exploit its cloud services and improve the integration and synchronisation between them.

    Should be easy for Google to do all of these three – all they need to do is check out what Apple has done and copy it …………………………..

    • Hamranhansenhansen

      That's how I learned to play basketball: I just watched what Michael Jordan did and copied it. EASY.

    • Nangka

      People seem to think Google is some smartass who can do great things if it "owns" everything.

      Moto is already using Android in its smartphones & tablets and they're failing miserably. How do these people think Google owning Moto can somehow turn things around dramatically?

      Are Moto's failures a case of software impeding hardware, or vice versa? With Droid & Xoom being first out of the gates respectively, you'd argue that the failures are more than both Moto & Google can solve by one owning the other.

      In view of this, Nokia's bedding with MS perhaps calls for more optimism given that both can build with each other's strengths and turn out stronger.

      • David

        Let's put it this way. Xoom's Flash support was developed with, I suspect, Adobe, Google and MMI developers all the same "room". For months.

        And Flash still didn't ship on time, is still a beta and still doesn't work properly on Android devices. How is direct ownership going to help?

  • http://twitter.com/WaltFrench @WaltFrench

    Huh… nobody asking why MMI, this company with great resources, great history, blah blah, decides to sell itself just months after going public. Yeah, sales are down; profits are absent or actually losses; it's losing share to more aggressive Android partners. But still, it has a bright future as the originator of the Droid line, the first Android with tablet software, obviously working well with Google.

    All while under legal attack that could have forced it to settle rather than risk settlements that could bankrupt the company. I see lots of ad hominem attacks on Florian Mueller's credibility at some sites (actually, TechCrunch where the blog insisted on adding my employer's name, so I had to butt out) but I don't see anybody citing any actual reporting on the MMI lawsuits to suggest they were the merely nuisance distraction that some say is Apple's only intent.

    So, desperate times call for desperate action. (It should be Michelle Bachmann's campaign slogan.) MMI was *possibly* — you never know for sure about lawsuits, even the SCO mess, until they're settled — running out of time. And *if* that were to have happened, how does Google's PR campaign about “bogus patents” look? A major business partner found by a competent US court to have violated patent claims, for… using Android. Driven to bankruptcy in part because in the name of "the economics of ubiquity," Google sucks all the oxygen out of its own ecosystem in order to build dominant market share.

    My take is that this was indeed a smart move by Google, keeping up the aura of inevitability shiny, part of the PR campaign to deflect possible settlements or decisions against them. They'll be able to say that the acquisition allowed them “better” terms with Oracle. That their financial muscle helped MMI reach better terms with the predatory Apple & Microsoft. And that the implicit muscle of all the tonnage of patents protects Samsung, HTC et al.

    Really, what more could they want, or expect?

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  • allanram

    Google may be scrambling to put together a superior Android product before Apple's iPhone 5 launch this October. They probably feel that iPhone 5 may run off with a significant piece of the smartphone market pie. And it may be difficult to rally the various Android licensees, with their own adaptations of the Android OS, to produce something as compelling as an Apple product and try to stop Apple from capturing the market lead.

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  • sagar

    You dont get it people! Google makes money by ads and that is what is important to them. How can you even think that a company like Google colud "LICENSE" android to others?

  • EWPellegrino

    The more I think about this the better the deal actually looks for Google, but only if it is absolutely ruthless with Moto – consider what it paid and what it got. It paid 12.5BN, but Moto has a 3BN cash balance, so effectively the price is reduced to 9.5 BN. It receives a huge patent portfolio, let's assume that they are worth around the same as the Nortel package, or 4.5BN. Ignoring the set-top box business that means that Google paid 5BN for a struggling handset maker, which seems pretty bad – but in fact may turn out to be very good.

    Motorola is terrible at software, really really terrible. They've always been terrible and they've shown no ability to get any better at it, Moto-blur is loathed. The problem is fundamental, if you have no skilled software teams then you can't create a good software team because you don't have people with the skill to build one. Trying to hire in external talent invariably fails because you have to overpay to get them and they have to fight against the entrenched hardware focused management.

    Suddenly everything for Moto has changed, they're now a division in a software firm, one of the best software firms in existence. If Google can build a software division at Moto that is even 75% as good as a Google team then Moto will suddenly be ahead of Samsung and perhaps even HTC in terms of integration. A few years of significant smartphone profits and Google could be in a position to refloat MMI as an HTC like pure smartphone play at a significant profit.

    So for this to succeed Google doesn't necessarily need to give Moto any special treatment as an OEM, they only need to give them an infusion of software DNA and ruthlessly cull the featurephone business.

    My prediction is that we'll see MMI's handset business refloated in 18-24 months.

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