This morning I awoke to the news that Google was buying Motorola for $12.5 billion, and I immediately started thinking about why they did such a move and what this will mean for the mobile ecosystem.
I can see two main reasons why Google would want to acquire a phone manufacturer: patents and to disrupt their competitor’s core business.
Lately, patents have been the weakest spot for Android, mostly because Google put themselves in that position.
Andy Rubin back in 2005:
“If Sun doesn’t want to work with us, we have two options: 1) Abandon our work and adopt MSFT CLR VM and C# language – or – 2) Do Java anyway and defend our decision, perhaps making enemies along the way”
And this is something that personally bother me. Now they are trying to buy as many patent as possible, whining when they loose bids
This anti-competitive strategy is also escalating the cost of patents way beyond what they’re really worth. The winning $4.5 billion for Nortel’s patent portfolio was nearly five times larger than the pre-auction estimate of $1 billion.
Of course they forgot to mention that they set the $1 billion estimate and that they bid 3.14 times their own estimate.
Now they announced they are going to buy Motorola Mobility with a premium of 63% on last Friday’s closing price. But, don’t worry, as Drummond just said in the conference call to announce the acquisition,
We’ve seen some licensing demands… the patent portfolio will help us make Android “open and vibrant”.
Now the question is: what will happen to the mobile ecosystem? I can’t imagine the other Android phone manufacturers being happy about this. (Google is saying they are, but I strongly doubt that—especially because this could mean becoming second-class citizens in the Android world.) Even if Google will release the source code to all manufacturers at the same time (mind you, they still haven’t released Honeycomb), why would someone buy a “generic” Android phone when they could buy the one made by Google themselves, which I’m sure will come with much better hardware and software integration and probably without crapware?
Given the amount of cash Google has in its war chest, they could willingly lose money on each device sold (maybe even give the phones away for free, with ads, of course), to gain an even higher market share. They obviously aren’t new to this practice; they did this with e-mails, documents, browsers, and mobile operating systems. Of course, this would piss off many Android manufacturers, but it will also cut the legs of Apple and their pricey devices. Or, maybe they could just give free tablets to every college in the United States, a market dominated by Apple (I know of school districts buying thousands of iPads for their students).
I suggest you to buckle up because I’m sure the next 12 months are going to be a really exciting ride.