I’ve just read the news that Google has agreed to buy Motorola Mobility for $40 per share in cash, totalling around $12.5billion. This is an absolutely genius move by Google and pulls the rug out from under Apple and Microsoft who have been aggressively targeting anyone that manufactures Android devices.
Firstly, there is the price. $12.5billion is a big premium (63%) to the quoted stock value, but it is still only 1 times Motorola’s turnover. Motorola has $6billion in assets on its books and they have turned the company around from loss-making to break-even over the past 3-4 years … mainly thanks to Android. All Android manufacturers will sell more phones this year as the smartphone market as a whole grows 60-70% globally, so Motorola will probably make a decent profit in 2011. In a year this deal will look very cheap indeed.
Secondly, as a strategic investment it is priceless. Google can now force all other smartphone manufacturers to ‘keep up’ with Motorola without having to push 3rd parties to make its ‘Nexus’ devices. Google can therefore manage the pace of innovation and its direction. Even more valuable, however, is Motorola’s patent portfolio which has been built up over 80+ years! Motorola, like Nokia, has been in the mobile business longer than Apple & Microsoft and therefore has a range of very broad and fundamental patents which Apple & others cannot help but breach. Last year Motorola sued Apple for breach of 18 patents including: WCDMA, GPRS, 802.11, antenna design, wireless email, proximity sensing, software application management, location-based services and multi-device synchronization. They even claimed that Apple’s MobileMe and App Store infringed some other patents!
It is important to note that Motorola has already taken action against Apple to invalidate 11 of Apple’s granted patents … many of which Apple is trying to use against HTC. Motorola has 17,000 granted patents globally and 7,500 pending patent applications!
Google have been saying recently that Apple and Microsoft are so threatened by Android that they are attempting to stifle it via patent wars, rather than out-innovating the Android device manufacturers. Given the pace of growth of Android you can easily believe that both Apple and Microsoft are seriously worried. Both companies will now have to think twice as Google will no doubt use its newly acquired patent portfolio to counter any claims. Google has also recently acquired 1000 IBM patents which appear to relate mainly to cloud-based services … something Apple and Microsoft are focussed on.
The patent wars will no doubt continue, but Google has increased its range of IP weaponry a huge amount in recent months. They’re also putting their cash reserves to good use, rather than just sitting on them. It says a lot for how important Android and the smartphone space is to Google and how seriously it views the threat from Apple and Microsoft.
Larry Page, CEO of Google, said, “Motorola Mobility’s total commitment to Android has created a natural fit for our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.”
Andy Rubin, Senior Vice President of Mobile at Google (and founder of Android), said, “We expect that this combination will enable us to break new ground for the Android ecosystem. However, our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.”