Motorola has a history of over 80 years of innovation in communications technology and products, and in the development of intellectual property, which have helped drive the remarkable revolution in mobile computing we are all enjoying today. Its many industry milestones include the introduction of the world's first portable cell phone nearly 30 years ago, and the StarTAC--the smallest and lightest phone on earth at time of launch. In 2007, Motorola was a founding member of the Open Handset Alliance that worked to make Android the first truly open and comprehensive platform for mobile devices. I have loved my Motorola phones from the StarTAC era up to the current DROIDs.
It may be the boldest move yet by a company known for being audacious: Google is spending $12.5 billion to buy Motorola Mobility. But the big prize isn't Motorola's lineup of cellphones, computer tablets and cable set-top boxes.
Google wants to pony up $12.5 billion to acquire Android handset maker Motorola Mobility. Buying Motorola would give Google thousands of patents that could provide it with a great deal of protection; it would also give it the ability to produce its own mobile hardware. Other Android phone makers have expressed support for the deal, though privately they may be very nervous.
The patents would help Google defend Android, its operating system for mobile devices, against a litany of lawsuits alleging that Google and its partners pilfered the innovations of other companies.
In addition to the existing trove of patents that attracted Google's interest, Motorola, which introduced its first cellphone nearly 30 years ago, has 7,500 others awaiting approval.
Phone makers and software companies are engaged in all-out combat over patents for mobile devices. The tussle has been egged on by the U.S. patent system, which makes it possible to patent any number of phone features.
The deal is by far the largest Google has pursued in its 13-year history. Motorola Mobility's price tag exceeds the combined $9.1 billion that the company has paid for 136 previous acquisitions since going public in 2004, according to filings with the Securities and Exchange Commission.
Buying Motorola also would push Google into phone and computer tablet manufacturing, competing with other device makers who rely on Android. The largest makers of Android devices are all supporting a deal that Google CEO Larry Page said was too tempting to resist.
"With mobility increasingly taking center stage in the computing revolution, the combination with Motorola is an extremely important step in Google's continuing evolution," Page told analysts in a conference call Monday.
What is Google getting with its planned $12.5 billion acquisition of Motorola Mobility?
After coming back from the brink of bankruptcy and splitting from Motorola Solutions at the beginning of the year, the company has faced a myriad of problems. Beyond the loss of market share, Motorola has suffered from high-profile product delays, including its first 4G LTE phone from Verizon. Pricing miscalculations led to the lackluster debut of its Xoom tablet, as well as the Atrix 4G smartphone, which came with a pricey laptop dock accessory.
After coming back from the brink of bankruptcy and splitting from Motorola Solutions at the beginning of the year, the company has faced a myriad of problems. Beyond the loss of market share, Motorola has suffered from high-profile product delays, including its first 4G LTE phone from Verizon. Pricing miscalculations led to the lackluster debut of its Xoom tablet, as well as the Atrix 4G smartphone, which came with a pricey laptop dock accessory.
Certainly, Google's acquisition of Motorola is largely about its portfolio of 17,000 patents (with 7,500 more pending). But even if Google plans to run Motorola as a separate unit, there are bound to be issues that Google will need to deal with.
For instance, Motorola's share of the smartphone market in the second quarter fell to 4.1 percent from 4.9 percent, according to a recent study by Gartner. At the same time, Samsung Electronics' share nearly quadrupled to 15.8 percent, while LG Electronics' share similarly quadrupled to 4.6 percent. HTC saw its share slightly increase to 10.2 percent.
Still bullish
Google and Motorola put on their best faces today with the announcement.
"We're really excited about this whole business and working with Motorola and their team," Google Chief Executive Larry Page said today on a conference call. "There's tremendous opportunity here."
Jha said on the call that the company will continue to use its strong relationships with its carriers to drive sales. During the last quarterly conference call, Jha added that despite a weak forecast for the third quarter, the fourth-quarter results should pop as a result of a number of new product launches.
Motorola is expected to benefit from working even more closely with Google. Analysts say the company will likely get access to the latest features from Android, giving it a leg up on the competition. Such an advantage, however, may alienate some of Google's other allies in the Android world.
In the end, Motorola's issues may not be a huge priority for Google.
"It's about the patents," said Avian Securities analyst Matthew Thornton. "Operations are house money."
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