Advertisement

Blog

Google Draws New Battle Line With Bid to Buy Motorola

{complink 2294|Google} is no longer skirting the edge of the OEM market. The company announced today that it plans to purchase {complink 12925|Motorola Mobility Inc.} for $12.5 billion. That move sets it in direct competition in both the hardware and software space against {complink 379|Apple Inc.}, the top smartphone vendor.

The transaction was totally unexpected by most industry pundits, but it makes sense for Google. It will continue to offer its Android operating system to other wireless handset and tablet PC OEMs. However, with this move, it also gains a privileged view into all segments of the business, including design, marketing, service provider requirements, and the end-to-end supply chain. The deal, if concluded, would give Google the counterbalance weight it needs to fend off attempts by Apple to curb the growth of Android.

Here are some details and my take on the development:

  • Price
  • . Google would pay $12.5 billion, “a premium of 63% to the closing price of Motorola Mobility shares on Friday.” That's a price nobody will quibble over, and Google has the funds ($39 billion in cash and short-term investments at the end of the most recent quarter) to pay the bill without sweating.

  • A friendly transaction
  • . The boards of both companies have already approved the deal, which means the only additional hurdle they need to clear would be any regulatory objections. I don't think this would be a problem. Aside from Google's Android OS offering, it would be difficult for rivals and regulators to see any antitrust problems here. To avoid even the hint of a conflict of interest, though, Google said it will continue developing and licensing Android to any interested parties. Furthermore, Motorola Mobility would be managed as a standalone division.

  • Motorola Mobility shareholders are the immediate winners
  • . Long-suffering shareholders in Motorola Mobility (and the old Motorola Inc.) are finally getting a much-deserved payoff — and a hefty one, too. The company was the premier wireless handset vendor until it fell into a rut and was overtaken first by Nokia and then by a bunch of competitors, including Apple and Samsung. Through this period of underperformance, the shares naturally suffered, and the company repeatedly had to postpone the planned spinoff of its handset division. In fact, the initial plan to sell the business was eventually abandoned, because there were no takers. A cleanup followed, and now Google has made its bid. Sweet.

  • Apple can't hide
  • . Yes, Apple makes great products, and the consuming public loves the company for its innovative spirit, but it's beginning to sound and act like one of those monopolies some of us detest. Apple has spent a lot more time in courts lately chasing companies that allegedly copied its product design. (See This Apple Win Should Not Stand.) The lawsuits have not been about wireless handsets, though. Apple has concentrated its firepower in the tablet PC market, where it is facing some pressure from the likes of Samsung.

    Although Apple still leads in this sector, it is obvious rivals are gnawing at its leadership, and recent court victories have doused concerns it could shut them out of the market. Well, if the Motorola Mobility-Google tie-up goes through, Apple will have to return to its innovative spirit to retain market leadership. Motorola Mobility not only would get the funds it needs to design winning products, but it also would be joining one of the more popular names in the business world. I can just imagine the interest worldwide ringing up already in Motorola Mobility.

  • Results are still key to winning
  • . Before we get ahead of ourselves, it needs to be restated that merely agreeing to be purchased by one of the more recognized names on the planet won't deliver Motorola Mobility from the crushing pressures of the competitive landscape. The company still has to design, market, and sell competitive products. What it would gain is some level of goodwill, but this won't go far enough if it cannot make products that at the least match Apple's. We'll be watching.

I will follow up with a more detailed analysis of why, and if, the market will support this transaction.

15 comments on “Google Draws New Battle Line With Bid to Buy Motorola

  1. eemom
    August 15, 2011

    Sweet Indeed!

    I think this is a smart move on Google's part and a lifesaver for Motorola Mobility.  As much as I love Apple's products, I don't love their approach to competition.  Apple would love to have the monopoly on the market and continue to charge premiums for all its products.  I hope that Google can be successful in this space and so they can keep Apple “honest” so to speak.

     

  2. Ms. Daisy
    August 15, 2011

    “merely agreeing to be purchased by one of the more recognized names on the planet won't deliver Motorola Mobility from the crushing pressures of the competitive landscape.”

    I want to respond to this by stating that the purchase might be the boost MM needed to get out of the rut. Layering this new partnership on top of the excitement by googles” young audience might be the prescription that MM needs to snap out of its slump. I believe it is a win-win for MM and google.

     

  3. Jay_Bond
    August 15, 2011

    Google's potential purchase of Motorola Mobility is a great idea. This is going to help take some of Apple's monopoly power away. This will also serve cell phone customers better by allowing better phone choices with multiple carriers. Google's brand power should also help ease any concerns over Motorola having staying power. People will buy these products based on the Google name, just like they flock to anything that has an Apple on it.

  4. saranyatil
    August 15, 2011

    Wow This is the best buy of the quater. We have always seeing best innovations from Apple, I think there should be strong competetion such that we can expect some marvellous phones.

    I would now say the war has begun.

  5. Houngbo_Hospice
    August 15, 2011

     Google is certainly on a collision course with Apple. But we can just rejoice because it will open way to more innovations from both companies. Apple will have to offer its products with more competitive prices, as Google android phones (and future tablets) will certainly cost less than current iphones and ipads.

  6. Houngbo_Hospice
    August 15, 2011

    “I would now say the war has begun.”

    We can say that.. But Google has to wait a while for the deal to be approved by the Federal Trade Commission (not before the end of the year). By this time Apple will have come up with a good “fight back” strategy for sure. 

  7. saranyatil
    August 16, 2011

    It will take an year for everythin to set right, Apple would have already thought how to fight it now before the acquisition itslef. In the mean time Google will be working to roll out the best Android phone.

  8. mfbertozzi
    August 16, 2011

    I would like to get back on a post from t.alex not discussed (time was gone!) yesterday during the wonderful chat about Google & MM acquisition.

    They are very active with GoogleApps for energy-meter for example and MM now brings (potentially) an own hardware for new development.

    Google has an interesting track record of a lot of botched enterprises which don't work out exactly as planned.The reason there is not much by way of strategy that goes into most of Google's proccesses.

     

    We can assume companies' merge won't be easy; if we assume above mentioned rumors are true (even partly), it seems next steps for Google will be very strong. Can we state strategy for MM acquisition brings definitely positive results?

  9. _hm
    August 16, 2011

    Next step for Goggle is getting powerful, low power 18nm processor – may be ARM cores and its manufacturing fab. Will Google now try for AMD? Goggle Nexus phone is wonderful design and they can give very good solution to rival Apple products.

     

     

  10. mfbertozzi
    August 16, 2011

    Well done _hm. Yesterday during the live chat on the topic here @ EBN, it was outlined Google in general addresses young people. So why the acquisition of Mobile Motorola, instead of Acer for example? They are approaching tablet and handset as well and hw is already Android compliant. In addition products are very cheap, as per young people possibility. Was MM a matter of “brand”?

  11. Anand
    August 19, 2011

    @eemom,

     I agree with you that this is smart move on Google's part and a lifesaver for Motorola Mobility. But I am sure this move will upset companies like Samsung/HTC which are supporting android OS. Needs to be seen if these companies will reconsider their support to android.

  12. Anand
    August 19, 2011

    “Next step for Goggle is getting powerful, low power 18nm processor – may be ARM cores and its manufacturing fab. Will Google now try for AMD?”

    @_hm, Are you suggesting google will buy AMD ? I think its very unlikely because AMD is doing pretty good interms of growth and I dont think they would like to sell their business unit. It would be unfair to compare Motorola with AMD and ARM.

  13. eemom
    August 19, 2011

    @Anandvy – I agree and I actually asked that same question during the live chat session.  The official answer remained that Google discussed this move with their hardware customers prior to the announcement and that they were all supportive.  However, if I were Samsung /
    HTC, I would wonder how this would affect the competitive landscape if my OS provider is also my competitor in the market.

  14. Anand
    August 20, 2011

    I would wonder how this would affect the competitive landscape if my OS provider is also my competitor in the market.

    @eemom, there was an article in WSJ which said

    “Taiwanese smartphone maker HTC Corp. will stick with Google Inc.'s mobile software despite the software giant's planned acquisition of competitor Motorola Mobility Holdings Inc. and will continue to pursue acquisitions to grow”

    The reason HTC will stick to android is it believes “Android is not the operating system, it's the ecosystem”

  15. JADEN
    August 31, 2011

    For Google to have invested that sort of cash to acquire Motorola, it is really meant for business, it will do whatever it needs to ensure success.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.