It’s quite possibly the biggest mobile news of the summer. Google is coughing up $12.5 billion in order to buy out Motorola Mobility. The move is so controversial, even the great economists of our country have wildly differing opinions. Now, I’m not saying by any means that I have even close to the knowledge of the people picking this development apart, but I’m going to take a crack at it anyway. What I lack in formal education, I make up for in ability to research. I’ve spent all day combing through reports, websites, financial forums, and lord knows where else in hopes to present our readers with the possible benefits and pitfalls of this new “merger” as well as my own opinion. Let’s see what in the world Google has gotten themselves into.
What exactly did Google get?
So let’s look at the facts first. Google just bought Motorola Mobility for $12.5 billion. Realize that even for Google, this is not exactly chump change. Remember the Nortel patents? Those 6,000 patents cost three companies $4.5 billion. Google paid a little less than 3x that. On the mathematically bright side, they got about 3x the amount of patents those other companies did. And even better? All to themselves. For you statistic people, Apple, Microsoft, RIM and company paid about $750,000 per patent (yeah, rap your head around that number). Google got 17,000 outright, and 7,500 more that are awaiting approval. That’s a little more than $510,000 per patent. So in terms of raw numbers, Google got quite the deal* compared to the Nortel deal (and some here at TA think Google purposely sat out on that purchase).
*Of course, many would argue that paying this much for patents is ridiculous regardless. I would agree.
In terms of the quality of the patents? That’s up for debate. Many believe that the Nortel patents only had a few “quality” patents (as in, would be good for patent trolling others), but none in particular that would make opposing companies shake. Motorola patents are up to equal debate, however one thing is agreed upon: Google bought this patents to protect Android, not to attack others. In a world where patent trolling is getting as much money thrown at it as development, I can only hope Google stays true to its claims of competing with innovation rather than lawsuits. One thing is for certain, Motorola has been in the mobile business a long time. If you added the years that a lot of companies that are still relevant in the mobile world today together, and still not come close to Motorola’s experience. Their patent portfolio is so loaded, it goes way back to the days of walkie talkies. So if it comes down to an actual all out legal brawl, you can bet some of the IP that they have can be used. Some of it is probably so essential to how mobile phones work, a few of them might be negated for the fact of how standard they’ve become. If none of that is making sense to you, think about it this way: A patent portfolio this large has got to have some hidden gems in it. Would you rather pick up an entire country to search for gold, or pick up a few cities?
Why did they do this?
There are a couple of dark room theories floating about, but most of them center around the idea that Android is sick of Microsoft and (specifically) Apple of trying to run their manufacturers out of town with lawsuits. Some of the lawsuits have gotten so absurd it’s clear that Google decided to put its foot down. How ridiculous? Here a few key points that Apple is using in the Samsung case. The iPad has unique design elements in
– a rectangular product with four evenly rounded corners;
– a flat, clear surface that covers the front of the product;
– a visible metal frame around the flat, clear surface;
– a display that is centered on the clear surface;
– under the clear surface, a neutral margin around the sides of the display;
– if the product is switched on, colored icons within the display
That’s absurd. A rectangular product? Having a clear glass cover/protect the product? But rather than go on another tirade (and trust me, reading those again, I could) about how stupid they are, I’ll let those points speak for themselves. Everyone knows it, and apparently Google said enough is enough. Google wants to use this purchase as a way of protecting the Android manufacturers of the world. What could end up happening is Google coming to the rescue if they think they need it. They’ve already said they plan to back HTC against Apple, now they has nearly 3 times the patent portfolio of Apple (in the mobile world) to do that with. I personally think this is going to lead to a cold war of sorts between Apple and Google. Apple won’t dare target the satellite companies knowing that they could unleash the metaphorical wrath of the Soviets by doing so. Similarly, Google won’t mount an attack for fear of retaliation (and because they are currently morally opposed to it). If these two companies launch full frontal assaults on each other I wouldn’t be surprised if the judge would just send them out back to fight it out. Can you imagine comparing these two portfolios to see who’s infringing more? It would take decades to sort out that mess.
Ulterior motive (warning: conspiracies ahead)
Another interesting idea has been discussed. Perhaps Motorola’s threat to sue other Android companies was a carefully calculated move. Google has already gone on the record to say that they will let Motorola Mobility run as their own company. Essentially, they want nothing to do with the company outside of their IP (surprise). This is important for later. But for now, it brings up the question: Why did Google buy all of Motorola if they could have just bought the IP? I’m guessing Motorola wouldn’t bite. Google probably offered/made some kind of deal to be able to use Motorola Mobile’s IP portfolio. Motorola (a company that has not been doing too well financially recently) saw this as an opportunity to be bought up by Google. I think Motorola threatened to sue other Android manufacturers as a way to make Google buy them. If they wouldn’t let them buy their IP separately, this move would force Google to buy them. Motorola now knows (or thinks possibly…I would not be surprised if Google doesn’t care if the company is sold off/goes under, as long as they still hold their IP) that they have arguably the most innovative technology company on their side. Yes, Google is a search company first. But their job positions for software design, engineering, and programming are among the most competitive/selective jobs in the country. Motorola wants to be part of that. For a company that seems to make amazing advances in technology once a decade or so (then slide back to irrelevancy), having the Google muscle and brain behind you has got to be a plus. In order to prevent an internal war, Google was forced to buy out Motorola. So now if Motorola tries to sue HTC, the big boss may put his phone down.
How will this affect HTC, Samsung, and the lot?
In my honest opinion, not very much. In fact, HTC and Samsung have already gone on the record supporting this merger. Why? Because they know this is a bigger victory for Android than it is for Motorola. Remember that thing I told you to remember earlier? Google has also stated a conference call that Samsung and HTC may still bid to be the next Nexus maker. The spot is not guaranteed to Motorola by any means. Google has told the world they will not be interfering with Motorola’s plans in the smartphone world; they’re still on their own. So while many people still think that this is a huge set back and the beginning of a giant civil war, I can’t believe Google would do that. Think about it. Google has captured 40% of the market because of companies like HTC and Motorola fighting over who has the best new feature. They want nothing to do with Apple’s model of “one phone, one manufacture.” That’s a great business model for Apple for what they want to accomplish, but a terrible one for Google. For a company that saw how lucrative the mobile world would be for them long before Apple even released the iPhone, I can’t imagine they missed this. If I can catch it, the minds working at Google have probably already done so. You can make fun of companies like Sprint for buying a failing Nextel or something similar, but Google has shown no indication of business practices that poor. With what could be their biggest purchase ever, I doubt they didn’t think this one through.
All in all, I bet you can see where I think this is going: I think this was a good (not great) acquisition by Google. I do think that they got forced into buying a bleeding company to reach their ultimate goal, but I think that goal was worth it. Google is now the big kid on the block when it comes to mobile patents. Even better, I wonder if this will force the other Android companies to band together just in case. I called for an Android coalition a while ago, and this move might actually make that happen. If Google can form an alliance with Samsung, HTC, and possibly even Sony, no one would dare sue them. It’s a win win for all sides, which is why I think it will happen. Although I doubt it was on the table, but HTC can’t sue Samsung. They know Google will step in. It doesn’t help just knowing Google, why not be permanent friends? I hope the other companies come to some agreement of mutual protection in case of an attack. The allies won WWII because they worked together. Hopefully the allies of this this smartphone cold war realize that sooner rather than later.
Why is this a cold war?
I still hate all of this. I still hate that a company has to spend $500,000 on a patent just because their innovative device roughly-kinda-sorta infringes on some obscure, broad patent. A lot of great innovations came from the “little guy.” I don’t want a world where people stop innovating because they’re afraid that bigger fish will come along to eat them. I hate that Google just spent $12.5 billion on patents instead of researching or investing in the newest technology. How many nukes do you think we built instead of using that money for the school systems? Too many. It’s the same thing here: No one wins with the current state of things. Apple will surely counter this with an acquisition of their own to surpass Google, followed by Google doing the same. One reason for the demise of the Soviet Union was the amount of resources put into weapons against the US rather than into their own country. If both companies are so busy staring each other down, one will have to trip eventually. Who do you think it will be?