Internet Video

What Will Google Do With Motorola?

8/22/2011 12:01 AM Eastern

Google was intensively searching
for a trove of mobile patents — and found it
at Motorola Mobility.

Last week, the Internet-search giant offered
$12.5 billion in cash to get its hands
on Motorola Mobility’s 17,000-strong patent
portfolio. Less clear was what the surprise
deal means for the cable industry and what
will become of Motorola Mobility’s Home
group, a major supplier of set-tops, cable modems,
video-on-demand systems and other
technologies to cable and telecom operators.

“They did it for the wireless side — and they
got the cable side along with it,” IBB Consulting
managing partner Imran Shah said.

Google executives cited the Motorola patent
portfolio as helping to “better protect”
the Android operating system for mobile devices
from rivals. The deal will “supercharge”
the Android ecosystem, Google CEO Larry
Page said.

“Our acquisition of Motorola will increase
competition by strengthening Google’s patent
portfolio, which will enable us to better
protect Android from anti-competitive
threats from Microsoft, Apple and other
companies,” Page wrote in a blog post last
week.

Google said it would run Motorola Mobility
as a separate business. The Internet
giant, which generated an $8.5 billion net
profit for 2010, promised that it would keep
the Android operating system open. It also
said that Motorola Mobility would remain a
licensee of the software, like Google’s other
mobile-devices partners.

According to an executive familiar with
Page’s management, the CEO was obsessed
with resolving the company’s deficiency on the
patent front after a consortium including Apple,
Microsoft and Research In Motion teamed
up to buy Nortel’s 6,000 patents for $4.5 billion
in July. Page mandated seven-day workweeks
by senior Google execs until they came up with
a solution, according to this executive.

The deal seems to have shifted dynamics
in the industry quite significantly: “Comcast
overnight has become a huge customer
of Google, and Comcast has no way out of
that in the short run,” the executive said.

Meanwhile, the proposed takeover raised
the concern of the American Cable Association,
whose smaller, independent MSO
members don’t want Google to abuse its
market position.

Some believe Google could
bring some Silicon Valley sex
appeal to cable technology,
which is perceived as generally
evolving at a glacial pace.
Google has a real opportunity
now “to come in and unlock
innovation” on the set-top side,
IBB’s Shah said. “The timing
is good,” he said. “There’s an
underserved need … Google
has TV aspirations — they
now have access to 65% of U.S. MSO homes
through this acquisition.”

Google has its own Internet-to-the-TV
strategy, dubbed Google TV, which uses the
Android operating system to bring Internet
content and interactive features to televisions.
Since they were introduced last fall,
Google TV-based products have sold poorly.

Other analysts aren’t convinced that
Google, whose core expertise is software
development, will achieve any significant
synergies with Motorola in the cable space.
“Motorola [set-tops] will not be the savior of
Google TV,” Colin Dixon, a senior analyst at
The Diff usion Group, wrote in a blog post.

The deal was unanimously approved by
the boards of both companies but is subject
to various closing conditions, including regulatory
approvals and the approval of Motorola
Mobility’s stockholders.

MAKING GOOGLE-Y EYES

KEY ELEMENTS OF GOOGLE’S BID FOR MOTOROLA MOBILITY:

The $12.5 billion takeover would be Google’s largest ever,
eclipsing its $3.1 billion takeover of DoubleClick and $1.65
billion acquisition of YouTube.


The deal is expected to close
by the end of 2011 or early 2012.


Motorola Mobility had
19,000 employees and Google had
24,400 at the end of 2010.


SOURCE:
Company reports

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