Published on August 17th, 2011 | by Bilal Sulehri5
Google to Acquire Motorola Mobility – Analysis
Google has announced that it has entered in a definitive agreement with Motorola to acquire Motorola Mobility. A press release by Google read:
Google Inc. (NASDAQ: GOOG) and Motorola Mobility Holdings, Inc. (NYSE: MMI) today announced that they have entered into a definitive agreement under which Google will acquire Motorola Mobility for $40.00 per share in cash, or a total of about $12.5 billion, a premium of 63% to the closing price of Motorola Mobility shares on Friday, August 12, 2011. The transaction was unanimously approved by the boards of directors of both companies.
What is Motorola Mobility?
Motorola Mobility Holdings, Inc. fuses innovative technology with human insights to create experiences that simplify, connect and enrich people’s lives. Our portfolio includes converged mobile devices such as smartphones and tablets; wireless accessories; end-to-end video and data delivery; and management solutions, including set-tops and data-access devices. For more information, visit motorola.com/mobility.
The important point about the proposed acquisition is that Google has ensured that Motorola Mobility will be run by Google as a separate business & Android platform will remain open-sourced as Motorola Mobility will remain a licensee of Android.
The acquisition of Motorola Mobility is expected to be completed by the end of 2011 or start of 2012. By acquiring Motorola Mobility, Google has not only acquired the smartphone business, but with it, it has also acquired Home TV & home products business and a lot of patents. Hence the purchase can give Google an access to new markets and yield multi-pronged benefits for Google. An analysis of a few aspects of the deal and how it will effect Google follows this para.
Having closed its PowerMeter project earlier this year, the internet giant will once again find it in the same market with 4Home which was acquired by Motorola as a startup and focuses on connecting appliances to the user’s devices hence enabling the user to access health information & security information on their devices whenever they want it.
Motorola is second largest manufacturer of set-top boxes in the world, hence there could be synergies between Motorola’s set-top boxes business and Google TV. This could also be a platform for Google to jump from internet to the lounge of its customers, if this happens the day is not far when all the devices at a standard home will be powered by Android and controlled through a smartphone or a tablet manufactured by Motorola.
Google’s involvement in the TV business is not the driver of the deal in my opinion. The deal is all about protecting one of the major building blocks of Google’s empire, Android. Google has been expecting to face litigation on many matters which could curtail Android’s future development if it did not acquire patents. The acquisition of Motorola Mobility is primarily aimed to ward-off competition from Apple and Microsoft and secure intellectual property rights to ensure future growth and further success of Android. Motorola’s portfolio includes around 17,000 patents issued worldwide and a further 7,500 pending approval, this patent portfolio is the real deal which spurred Google to acquire Motorola Mobility. The acquisition will not only strengthen Google’s patent portfolio but will also lower the risk of higher licensing fees on Android manufacturers.
Android held 43.4 percent of the smart phone market share at the end of the second quarter, Nokia was second and had 22 percent while Apple lagged behind on 3rd having 18 percent of the smart phone market share. But Apple’s iPhone is still considered more innovative than Android based phones and Apple has been pursuing a policy of actively bringing down patent infringements with lawsuits as it recently settled a lawsuit with HTC for the Taiwanese manufacturer’s Android based smart phones. Google’s acquisition of Motorola’s patents will give the manufacturers opting to go for Android based devices more room to manoeuvre with lesser threat of litigation from the likes of Apple & Microsoft.
Another plus to Google’s deal is that it can now launch mobile phones consisting hardware which it likes instead of relying on manufacturers, launching of Google branded phones like Nexus One will be easier than before. But a downside to this deal is very interesting, Google will now be seen to favour its own manufacturer, Motorla for Android based handsets. Motorola already accounts for around 11% of the Android phones in the market, however Google has declared that Motorola Mobility will be run as a separate business but only time will tell whether it will favour its own manufacturer or not.
Manufacturers’ reaction is still to be seen but whether Android will be an equal opportunity platform for all manufacturers will remain pivotal in future success of Android as Microsoft has already noted the fact that Windows Phone is the only platform left which deals all its manufacturers equally.
Tell us whether you agree with our analysis of the acquisition or not?