In a bid to protect the Android ecosystem from encroaching patent infringement demands from competitors, Google agreed to buy Motorola Mobility for $12.5 billion in its biggest deal to date. Google will buy Motorola Mobility for a 63 percent premium over its closing price on Friday at $40.00 per share in cash. The deal could add up to 19,000 employees to the search giant.
Google’s most explicit reason for the deal is that it needs to protect the Android ecosystem from what it says are increasing intellectual property attacks by rivals Microsoft and Apple. “Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio,” Larry Page wrote in a blog post announcing the deal. The move comes just days after comments from Jha at an investor conference suggesting that Motorola was also looking at asking for licensing fees. Such licensing fees would unravel the alliances that Google has carefully built over the years, as Android would no longer be an effectively free OS. Handset makers would have to pay royalties, which might lower their margins and filter into final costs for consumers. With the deal Google would pick up 17,000 awarded patents and 7,000 filed patent applications.
As far as developers are concerned, this deal would mean a number of things:
1. Google’s Motorola unit could set the bar higher, with better integrated and designed Android phones: When Google partnered with Samsung and HTC to release the Nexus One and the Nexus S, the company wanted to set expectations for what a top-of-the-line Android phone should look and feel like. Before that (and sometimes still to this date), the loosely-controlled federation of handset makers and carriers around Android would ship devices with bloated and unnecessary software or that didn’t take full advantage of Android’s capabilities. With Motorola, Google gets the ability to design its hardware and software in concert, which should help fix many of the performance, design and UI issues it has had relative to iOS.
2. This ends up being a validation of Apple’s verticalized approach: With Google getting into the hardware business, this is a big acknowledgement of the benefits of Apple’s approach, which involves controlling as much as possible from procuring and designing parts to the end retail experience.
3. But this deal could backfire. There may be more urgency for competing OEMs like Samsung and HTC to diversify now, creating a window of opportunity for Microsoft or even an eventual Facebook OS someday: Companies like Samsung and HTC took big bets in relying on Android and now they’ll be competing directly with Google. Even though Google claims that the acquisition will not change Google’s commitment to running Android as an open platform, handset makers will want to at least have insurance of that. They may want to consider the Windows Phone operating system more strongly just as a hedge. Other players, like Facebook, which may eventually need to build an mobile operating system at some point in the near future, could also leverage this urgency.