Google Buys Motorola Mobility

Google is buying Motorola Mobility Holdings,the provider of mobile and cable TV set-top devices and software, but said it intends to run the business at arms length, a wise move for a provider of operating system software to multiple handset manufacturers.

So now we have the definitive answer to the question of whether Google will become a supplier of mobile handsets. Because of its ownership of Motorola Mobility, the answer is “yes.” Sure, Google has dabbled in the area with the Nexus S. But Motorola is an established player in the handset market.

But it seems likely that Google is more interested in the patent portfolio than anything else, as patent infringement lawsuits recently have threatened Android’s cost structure in significant ways. By arming itself with its own patent portfolio. Read more here (Wall Street Journal subscription required)

By owning the Motorola patent portfolio, Google can do what most technology suppliers do, namely cross license patents, to settle such patent infringement lawsuits.

Google will acquire Motorola Mobility for $40 per share in cash, or a total of about $12.5 billion. The transaction was unanimously approved by the boards of directors of both companies.

Motorola Mobility will remain a licensee of Android and Android will remain open, Google says. The will pose all the traditional issues for a supplier of open source or widely-licensed software to third parties, namely potential reluctance to use a supplier that also is a competitor. Think about Microsoft’s operating system business and the situation it would have faced had it decided to also become a PC manufacturer or a mobile phone manufacturer.

But many of Android’s licensees have to wonder what might change. Samsung, for example, might be particularly affected. Read more here. Google might not be involved in the day-to-day operation of Motorola. But it is hard to believe Google will not try and use Motorola as a way of illustrating what can be done on the Android platform, much as it has done by building and selling the Nexus S. As Apple has been able to vastly improve user experience, so Google is likely to integrate Android with Motorola hardware in ways that provide similar advantages.

That isn’t to say software suppliers always shy away from their own branded hardware. Microsoft is a supplier of Zune MP-3 devices and XBox game players. But the business model in those cases is different: Microsoft does not license the underlying technology to third party suppliers. Google will be in the precisely analogous position Microsoft would have been in had it decided to license Windows and also sell its own branded PCs.

The perhaps unintended consequence is that Google also now owns one of the largest historic suppliers of set-top terminals to the U.S. cable TV business. Some cable operators might wonder what that might mean for them. To be sure, service provider fear of Google no longer is at what some might call irrational levels, as was the case several years ago.

On the other hand, U.S. cable operators have in the past been adamant about not allowing Microsoft to gain excessive control of what was seen as a strategic set-top decoder function. Cable operators cannot prevent Google from such a role, now, except by refusing to purchase Motorola set-tops and giving their business to rival suppliers such as Cisco.

On the other hand, like it or not, Google can bring all sorts of interesting capabilities to bear on set-top user experience. For better or worse, cable operators might do well to see what Google can bring in that regard. That might be especially true for cable operators who want to extend the “TV Everywhere” concept to a broader “experience everywhere” concept, as Motorola is a key player in the set-top business as well as the handset business.

Read more here.

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