Is it good? Is it bad? Is it smart? What does it mean from an Australian perspective? The one thing that seems certain is local analysts don't entirely agree on their interpretation of US software giant, Google's, agreement to acquire mobile phone and tablet maker, Motorola Mobility, for about $US12.5 billion. But they do agree it does come down to the patents.
And for good reason, considering the size of the acquisition and the potential opportunities and threats it creates not only to competitors, but for Google’s partners as well.
For IDC Australia infrastructure group senior analyst, Trevor Clarke, the move comes as a surprise, but he adds that, “IDC does not believe this announcement will shake up the market, rather it will serve to provide Google opportunities to enhance offerings.”
BuddeComm managing director and independent telecoms analyst, Paul Budde, was also surprised by the news, but for a different reason.
“Google paid a high price for a not so good company that is well over its peak and on the decline,” he said.
While a surprise move for some, Melbourne-based Ovum consumer IT analyst, Tim Renowden, sees Google’s purchase of the mobile device maker as the next logical step in the company’s expansion.
“It’s an interesting move from Google and brings it significantly closer to Ovum’s hypothesis of a “managed device platform” where a vendor controls all aspects of a platform, including hardware, software, content and online services,” Renowden said.
The question on the minds of many is why Google is making the purchase, and why they chose to do it now.
“The purchase gives Google access to Motorola's roughly 17,000 current patents and another 7,500 patents pending,” IDC’s Clarke explained. “That's a lot of IP, and by gaining access to Motorola's hardware Google now has an opportunity to more tightly control the entire smartphone or tablet experience in a similar way to what Apple has done.”
It is a reasoning that is echoed by Ovum’s Renowden, who points out that Google has been wanting to “supercharge” the Android experience for some time, and strengthen its patent portfolio in light of ongoing litigation between a number of participants in the mobile industry, particularly Apple and Samsung at this time.
“Google needs to build a defensive patent portfolio to protect Android, and vendors selling Android devices, from litigation,” he said.
“Motorola has a strong patent portfolio and a long history of producing advanced devices and technologies, but has been struggling financially for a number of years and this makes it an attractive target.”
BuddeComm’s Budde also sees it coming down to Google acquiring Motorola’s mobile business for its patents.
“Google is getting frustrated about the way patents are used to hamper the introduction of Android devices, and by now having access to a very large number of patents, they will be in a stronger position to push Android further into the market,” he said.
While Google is expecting to strengthen its mobile business with the Motorola purchase, many are wondering what the deal will mean for Google’s existing OEM partners using Android.
“The rhetoric about ‘supercharging’ the Android ecosystem is interesting, because other vendors could take it to mean that Google plans to work extra closely with the Motorola team,” Ovum’s Renowden said.
“This is dangerous for Google; if there’s even a hint of favouritism or signs that Motorola is getting an unfair advantage, other key Android vendors will not be pleased.”
To keep Google honest, makers such Samsung, HTC, LG, Sony Ericsson and other makers might potentially reinvest in alternative mobile platforms, with Microsoft’s Windows Phone ecosystem singled out by Renowden in particular.
IDC’s Clarke points out that Google has said Motorola will operate as an independent company and will licensee of any OS it uses, so Android will remain available to all of its OEM partners for the time being.
“Publicly, each of the OEMs would be thankful Google is stating its intentions in this way and it will give them some measure of relief,” Clarke said.
“However, behind closed doors it is likely contingency plans are being reviewed very carefully.”
BuddeComm’s Budde doesn’t see Google’s interest in Motorola going beyond the patents and doesn’t think that they are interested in selling hardware, and instead expects them to get out of the hardware part of the business over time.
“As this will be their overall strategy, there doesn’t need to be a reason to fear from other OEM partners,” he said.
“If Google handles that issue decisively with real action in the market, the fear will rapidly go away. It is a matter of good execution and good communication with its partners.”
When looking towards the future, a lot of people see the Motorola deal as just the beginning of a bigger push by Google into the growing mobile space, with more strategic acquisitions foreseeable on the horizon.
“I would expect Google to continue making strategic acquisitions, where the opportunity arises,” Ovum’s Renowden said.
IDC’s Clarke admits that there is always scope for further acquisitions but does not expect to see one of similar magnitude in the short term, a sentiment that is echoed by BuddeComm’s Budde.
“They are cashed up and they certainly will increase their acquisitions, but perhaps not so dramatically as they did with this one,” Budde said.
“But if they need to act strategically in order to progress their bigger picture, they won’t shy away from this.”