Early Monday morning, Google and Motorola Mobility shocked the communications and technology worlds with the announcement that Google would be buying Motorola Mobility for $12.5 billion. But that wasn’t the only acquisition announced (Time Warner Cable bought Insight Communications for $3 billion and Cargill bought Provimi for $2.1 billion also), so here’s the information you need to catch up on the Motorola Mobility acquisition and what may come of it.
First, some important background information: back in January, 82-year old company Motorola split into two separate companies: Motorola Mobility and Motorola Solutions. Motorola Mobility was intended to target consumers, while Motorola Solutions was intended for professionals. In the split, all of Motorola’s government products and sales went with Motorola Solutions.
According to many sources, Google’s motivation for purchasing Motorola Mobility centers upon increasing its patent portfolio (Motorola owns the rights to upwards of 17,000 patents) in order to protect the Android operating system from companies like Apple and Microsoft. According to a Forbes writer, “the key thing for Google to do was to have some countering intellectual property it could use to…threaten back.” Many analysts expressed concern that Motorola Mobility likely would not prove to have been worth the $12.5 billion Google is spending, but in the face of mounting pressure from competitors like Microsoft for intellectual property violations, Google’s purchase isn’t about producing mobile phones. Rather, owning the company will allow Google to use Motorola Mobility’s patents to protect the Android operating system from legal challenges.
The good news that has been celebrated since word of the deal surfaced is that Google has assured the world that it will continue to operate its Android mobile phone system as an open system, which means that any manufacturer can use Android on its products without paying a licensing fee. The only potential problem is that manufacturers may be less comfortable relying on Android if Google is also a direct competitor. The possibility exists that more people will embrace the new version of the Windows phone upon its release.
One of the other positives for Google is that buying Motorola Mobility includes Motorola’s set-top box business, which has been very successful. Set-top box technology accounts for about one third of Motorola Mobility’s revenues. Google’s involvement with this aspect of Motorola’s business could provide Google with an opportunity to pursue opportunities in living rooms throughout the US and possibly worldwide. Google will once again be competing with Apple (Apple TV), Samsung (SmartTV), and other similar companies for control of this huge market.
Keep in mind that federal regulators will look at this deal very closely to ensure that it does not violate any anti-trust laws before it is completed. Google has already preempted that discussion with its argument that Android has increased competition and innovation in the mobile phone market. (And they’re probably right.)
Here are some other interesting articles about the Google-Motorola Mobility deal:
Google: S&P Cuts Rating to Sell From Buy; Sees Risks in Deal – Forbes
RIM Left in ‘No Man’s Land’ By Google Deal – Bloomberg
Google-Motorola: Winners and Losers – SplatF
“Defending Android” – TechCrunch
Motorola Mobility Faces Suit Over $12.5 Billion Google Sale – Bloomberg Businessweek
Check back for more information about the ever-changing Google-Motorola Mobility deal.
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