Aug 22, 2011

Google's mobile bet could prove tricky

Google's plan to pay $12.5 billion for Motorola Mobility has mobile carriers and smartphone and OS makers scrambling to figure out how the proposed deal will affect them, analysts say.
Google CEO Larry Page said he expects the deal, announced last week, to "supercharge the entire Android ecosystem" and "better protect Android from anticompetitive threats from Microsoft, Apple and other companies" by giving Google ownership of Motorola Mobility's 24,500 patents.

Google said it expects the deal to close by early next year.
Motorola Mobility, which employs about 20,000 people, was spun out of Motorola Inc. early this year. The company is split into two groups: Mobile Devices, which manufactures smartphones and tablet devices, and Home, which makes set-top boxes and other IPTV equipment.
The addition of Motorola's Droid to Google's product inventory will likely create some tensions, at least early on, among carriers that sell the popular smartphone and other Android-based mobile devices, according to analysts.
Relying on carriers to distribute the products of a substantial hardware business will be a new experience for Google, and how the company handles it could determine whether the deal is ultimately successful, said Roger Entner, an analyst at Recon Analytics.
With the exception of the less popular Google-branded Nexus phones, the company has mostly dealt with service providers indirectly through an army of third-party Android handset vendors.
"The challenge is how they will transform from a partnership where they are an equal or a little more than an equal to a relationship where they are a little bit less than an equal," Entner said.
It won't be easy, said Avi Greengart, an analyst at Current Analysis. "Competing with licensees is incredibly difficult," he said. "Few have done it successfully."
Phil Marshall, an analyst at Tolaga Research, suggested that Google could calm some fears of carriers by creating a vertical stack of hardware and software for Motorola phones as a solid alternative to Apple's iPhone.
"When the Apple guy shows up with his turtleneck collar, he's not going to have as much leverage on the carrier if Google is successful, with Motorola, at catching up," Marshall said.
However, he did note that the move could alienate competing Android device manufacturers.
Any moves Google makes that seem to favor Motorola devices could drive top handset makers like Samsung and HTC to consider other operating systems, most likely Microsoft's Windows Phone. "In some ways, the big winner is Microsoft," Greengart said.
Meanwhile, Motorola Mobility's patent portfolio should help shield Google from future legal challenges to Android technology, though it may be too late to fend off lawsuits already underway, legal experts said.
Google never put much value in building its own patent portfolio and was caught off guard by the patent arms race that has come to define the wireless industry. Its deal to buy Motorola Mobility and its patents came just a week after it accused Microsoft, Apple and others of trying to impose a "patent tax" on Android to stifle its runaway growth.
Alexander Poltorak, CEO of intellectual property firm General Patent, said the patents will serve as a deterrent to companies thinking of suing Google or its partners. "Now they will think twice before filing a complaint, because they can be guaranteed Google will strike back," he said.

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