Posts Tagged ‘patents’

Google buys Motorola Mobility – So What?

Monday, August 15th, 2011

Interesting news today about Google buying Motorola’s mobile products division:

http://investor.google.com/releases/2011/0815.html

So what does this mean and who should care?

First, why would Google buy Motorola Mobility? I tend to agree with other opinions out there, that this was basically a purchase of a patent portfolio and a mobile products company was attached to the deal but wasn’t the real target. I don’t think Google is particularly interested in the company they just bought — they wanted a war chest of patents.

There is a patent war brewing in the mobile phone market and Google needed the ammunition to threaten Apple and Microsoft with counter-suits as they became increasingly litigous.

Of course, Google will try to keep Motorola Mobility profitable, to help pay for their acquisition of a bunch of patents.

This just highlights the foolishness of software / business method patents. They are incredibly wasteful of capital and add nothing to the economy. Google had to spend $12B to add no shareholder or customer value, just to defend themselves against a bunch of pointless lawsuits.

So what happens next?

First, it seems reasonable to assume that Google will want to continue to nurture its Android partner ecosystem. These partners will be understandably worried now that their OS supplier will compete with them in the hardware space. That’s quite the unfair advantage.

Google doesn’t want to scare off the Android ecosystem, so they will presumably run the acquired company independently of the main Google corporation. It will probably have no special advantages (such as early access to new OS versions) as compared to other Android partners. Google can then transfer the patents from this new subsidiary or organizational unit to its Android business unit, to be used as a defensive asset.

I would expect Google to use the patents to help defend its existing Android partners against suits by Apple, Microsoft and others. Google partners actually benefit from today’s transaction in that sense.

Does this mean that the formerly-Motorola business unit will continue with business as usual? Probably not quite. I would think that Google will make phones that are less full of crappy third party add-ons and “enhancements.” I would expect to see a clean OS and a clean UI on new Motorola phones, probably starting to show up in 6-12 months.

I don’t think Google is interested in the relatively small revenue streams generated by pre-installing junk and teaser software on phones. They are much more interested in a healthy Android ecosystem, which will drive future revenue growth on their ad platform, as more people search for more content from their phones. Google strikes me as a company with a long-term strategy, willing to sacrifice short-term revenue to win the long-term game.

This can only be good for users, especially as the other phone manufacturers are forced to clean up their OS distributions and stop filling their phones with junk, in order to compete with new Google/Motorola phones that have a cleaned up UI.

Presumably this is bad for Apple on at least two fronts:

  • Google and other Android partners can counter-sue Apple for patent infringement, effectively neutering their Apple’s strategy.
  • Google will force the entire Android ecosystem to make more user friendly phones, with fewer annoying add-ons, making any UI advantage Apple might enjoy today, at least as compared to non-rooted Android phones, disappear.

Apple may continue with a litigation-heavy strategy to compete with Android, in which case they will likely get shot down, or they may change strategies and focus on innovation instead. That would be better for everyone, including Apple.

Now that Google has bought Motorola, will Microsoft follow suit and buy RIM or Nokia? There is certainly buzz about that and both of those stocks bounced today.

Microsoft hasn’t traditionally been (a) acquisitive or (b) interested in the hardware business. They already have an extensive patent portfolio, so they can’t be too interested in RIM or Nokia’s patent portfolios. My bet is that they don’t make any acquisitions in response to today’s news, especially not RIM, whose platform is not really compatible with Microsoft’s future direction.

Interesting times we live in, but at least today the consumer came out as the big winner.